Written by Summary
Nike is a Dividend Contender with 21 consecutive years of dividend growth. Shares currently yield 0.88%.
Nike shares are off more than 20% from the highs reached in November 2021 and are much more attractive than just a few months ago.
Nike still appears expensive although the options market does offer some interesting opportunities.
code6d/iStock Unreleased via Getty Images Just about everyone, even those that aren’t engrossed by sports, can tell you what that logo stands for. Nike (NYSE: NKE ) has spent decades building its brand into the globally recognized and coveted brands for athletic closing and footwear.
Nike’s share price has languished since topping out in November and shares are now down over 20% compared to the S&P 500’s 8% decline. That kind of underperformance piqued my interest to see if it might finally be time to add to my position in Nike. Data by YCharts Nike’s business is primarily protected by its brand strength that has been built over the years and of course performance of their goods. As a consumer-facing company, that brand has to be reinforced primarily through advertising and in Nike’s case, sponsoring well-known athletes. Their brand and partnerships with top athletes instill a belief in their customers that the Nike brand will help that weekend warrior athlete to perform even better. Dividend History
The dividend growth strategy is the one that appealed most to me when I first began investing several years ago. The strategy is simple: find good businesses that generate plenty of cash that they can then send to you as a part owner in said business. Nike Dividend History (Nike Investor Relations) Nike got off to a bit of an inauspicious start with their dividend. After initiating in 1992, the dividend meandered a bit higher, then lower, then drifted a bit higher once again and was held steady for 20 long quarters. Although starting with 2002, Nike has been on a steady pace of growing their dividend with all but two years over that time coming in at less than 10%. Nike is now a Dividend Contender with 21 consecutive years of dividend growth.
During Nike’s dividend growth streak, year over year dividend growth has ranged from 8.3% to 32.5% with an average of 16.1% and a median of 15.4%.
Nike’s rolling 5-year period annualized dividend growth during their streak has ranged from 11.3% to 26.1% with an average of 16.0% and a median of 14.7% across 16 periods.
There’s been 11 rolling 10-year periods with annualized dividend growth ranging from 13.2% to 19.6% with an average of 15.6% and a median of 14.9%.
The rolling 1-, 3-, 5- and 10-year annualized dividend growth rates from Nike since 2002 can be found in the following table. Year FY Dividends 1 Year 3 year 5 Year 10 Year 2002 $0.0600 2003 $0.0650 8.33% 2004 $0.0850 30.77% 2005 $0.1126 32.47% 23.35% 2006 $0.1402 24.51% 29.20% 2007 $0.1702 21.40% 26.04% 23.19% 2008 $0.2070 21.62% 22.50% 26.07% 2009 $0.2400 15.94% 19.62% 23.07% 2010 $0.2600 8.33% 15.17% 18.22% 2011 $0.2900 11.54% 11.89% 15.65% 2012 $0.3350 15.52% 11.76% 14.50% 18.77% 2013 $0.3900 16.42% 14.47% 13.51% 19.62% 2014 $0.4500 15.38% 15.77% 13.40% 18.14% 2015 $0.5200 15.56% 15.79% 14.87% 16.53% 2016 $0.6000 15.38% 15.44% 15.65% 15.65% 2017 $0.6800 13.33% 14.75% 15.21% 14.86% 2018 $0.7600 11.76% 13.48% 14.27% 13.89% 2019 $0.8400 10.53% 11.87% 13.30% 13.35% 2020 $0.9300 10.71% 11.00% 12.33% 13.59% 2021 $1.0400 11.83% 11.02% 11.63% 13.62% 2022 $1.1600 11.54% 11.36% 11.27% 13.22% Table Source: Author; Data Source: Nike Investor Relations
The dividend payout ratio is a quick way to gauge the safety of the dividend by comparing how much of the profits or cash flow is accounted for via dividends. NKE Dividend Payout Ratios (Nike SEC filings) Nike’s net income payout ratio has averaged 35% over the last decade and 42% for the last 5-years. Meanwhile, Nike’s free cash flow payout ratio has averages of 43% and 47%, respectively. Quantitative Quality
When implementing a dividend growth strategy I want to make sure that the business is one that I’m comfortable with from both a quantitative and qualitative basis. For the quantitative side I like to examine a variety of financial metrics over time to see how the business has performed historically. NKE Revenue Profits Cash Flow (Nike SEC filings) Nike’s revenues have grown 84.6% in total over the last decade or 7.0% annualized with just one year, FY 2020, showing a decline. Gross profits have tracked with revenues climbing 90.6% or 7.4% annualized.
Operating profits increased 128.2% over the last […]
Protected by Patchstack