Sporting World Dividend Investing

Whether competitive or simply for fun, the sports industry is huge. In fact, the global market is expected to reach $303 billion by 2015. Of course, television has helped increase the overall sports industry market by providing coverage and garnering greater attention for mainstream and more obscure sports alike. 2014 is also a banner year for televised sports as the Winter Olympics and World Cup are literally drawing in billions of viewers. Have you ever given much thought to the companies that manufacture the apparel, footwear and equipment for professionals and weekend warriors alike? With dozens of companies in this mega industry I will focus on the more mainstream businesses that, of course, pay dividends.

 

First up, a company famous even before Air Jordan, Nike, Inc. (NKE). NKE currently yields a relatively low 1.30% with an equally low payout ratio of 28.5% making the dividend very safe based on current cash flow. However, the real mojo of NKE doesn’t come from its current yield, rather is stunning dividend growth. The ten year annualized dividend growth rate for NKE has been an eye popping 27.36%. That is some real serious dividend growth. On a valuation basis NKE seems a bit pricey on several terms. Its current PE is at 26.0 making it higher than the market as a whole and higher than its peers. Even forward valuation is a bit high at 22.0. The share price has definitely run up ahead of earnings on this one.

 

Next, is a company I recently wrote about (Dividend Aristocrats You Never Heard Of) that may not be a household name but its products are. V.F. Corporation (VFC), owners of such brands as Vans, Lucy, Nautica, Jansport, Eastpack, The North Face, Timberland among many others produces a lot of the sports and adventure footwear and apparel that many of us own and use. VFC currently yields 1.70% with a moderately low payout ratio of 34.0%. The exciting thing about VFC is its very long dividend raise history going back 41 years! The ten year annualized dividend growth rate for VFC is a very nice 13.74% as well making this stock a great long term buy. The valuation of VFC is relatively high at 22.5 but well below its peers. Looking for a reason to get into this great dividend stock… then feel better knowing its forward PE is only at 17.5 making this a currently expensive, yet high quality stock.

 

Columbia Sportswear Company (COLM) is another dividend paying company whose products are most likely in our homes. The makers of many active outdoor apparel, footwear, accessories, and equipment currently yields a relatively low 1.30% with a payout ratio of 32.8%. Being a fairly new dividend payer, since making its first distribution in 2006, COLM has a respectable five year annualized dividend growth rate of 7.29%. It may be a bit early to decide on how COLM will treat its dividend policy going forward but it may be one to watch in the coming years. On the valuation side COLM is expensive by any measure at 27.2 making it higher than the S&P on a current and forward valuation as well. COLM is a wait and see stock for sure.

 

In the pure retail segment of the sports industry is another dividend paying company that needs no introduction, Foot Locker, Inc. (FL). FL is the owner and operator of its namesake as well as, Lady Foot Locker, Kids Foot Locker, Champs Sports, among others. FL currently yields 1.80% with a low payout ratio of 26.7%. Like many of the low yielding stocks I have mentioned in this article and previous articles the ten year annualized dividend growth rate for FL has been an amazing 20.58%. These types of stocks always beg the question of seeking current yield or high dividend growth for your portfolio. The PE of FL is current 16.2 which makes this stock a relative bargain in the market today and is also cheaper than many of its peers. FL may be an interesting pick if you are seeking a high dividend growth rate.

 

Also in the retail space we have Dick’s Sporting Goods Inc. (DKS). For those not familiar with DKS on the west coast Dick’s Sporting Goods operates as a sports and fitness retailer. DKS currently yields 1.10% with a very low payout ratio of 19.0%. Another relatively new stock to pay dividends (regular payments since 2012), DKS sports an incredibly low valuation relative to the market and industry peers at only 16.6. Like FL, DKS may be a great dividend stock in the future but does offer a cheap “ground floor” entry point at current prices.

 

Finally, in the retail space we have Big 5 Sporting Goods Corp. (BGFV). Like DKS, BGFV operates as a sporting goods retailer in the western United States. It’s interesting to see how these two retailers have mostly stayed on either side of the United States with little overlap. Of all the stocks mentioned BGFV has a relatively high current yield of 3.40% which will get the attention from many dividend seekers. The payout ratio is at a pretty safe 39.2% which ensures future dividend payments based on current cash flow. Like DKS, BGFV has a very low PE of only 12.1 and a forward PE of 7.8. Of course, low PE’s alone do not make a stock cheap. It’s interesting to note that the two aforementioned retailers are the cheapest dividend stocks relative to the S&P and its peers by a large margin.

 

When looking at dividend paying stocks in the sports industry investors have a wide variety of choices when it comes to the type of dividend payment they are looking for. Do you want a current high yield (BGFV), high dividend growth (NKE, FL) or a lower dividend yield with stable growth (VFC, COLM). There is no denying the insane size of the sports industry market worldwide. Do you own a piece of it?

 

Disclosure: Long VFC

22 thoughts on “Sporting World Dividend Investing

  1. Hey DivHut,

    Nice analytics by sector, after checking out the pets and the ‘sector of death’ 🙂
    I’m not into sport companies as of yet, because I’m just starting and I’m sticking to the blue chip companies at the moment. However, Nike is a company I could put on my watch list, but it will be amongst many other great consumer goods companies like WMT, MCD, KO, PEP & TGT.

    Thanks for your thoughs, your portfolio is looking great!
    Dividend for Starters recently posted…Recent buy – JuneMy Profile

    • Hi DFS,

      Thanks for stopping by. VFC is a blue chip in my book. You may not be into sports companies, but VFC is a little different since it has many other diversified brands and products. Most of the stocks you mentioned are all good too. Personally, I’m not a fan of TGT or WMT. Thanks for checking out my portfolio too.

    • Hi Brian,

      Glad you liked the post. VFC is one of those awesome companies most people never heard of but know their famous brands. Whenever I travel up north, Seattle, Canada, especially in the winter, all I see is The North Face gear.

  2. Nike is a winner!
    Not just because i own it, 🙂
    I think they are doing wonderful job at least what comes to soccer, the new boots are quite amazing and they are something that have never been seen in soccer world, and the reviews are good. But you can’t just place your bet on one item.
    Fourth quarter revenues from continuing operations up 11 percent to $7.4 billion
    Fourth quarter diluted earnings per share from continuing operations up 3 percent to $0.78
    Fiscal 2014 revenues from continuing operations up 10 percent to $27.8 billion
    Fiscal 2014 diluted earnings per share from continuing operations up 11 percent to $2.97
    Worldwide futures orders up 11 percent; 12 percent growth excluding currency changes
    Inventories as of May 31, 2014 up 13 percent

    Looks good to me.

    VFC also looks good have to check it out thanks for the tip!

    Regards!
    Investingidiot recently posted…My 2nd Quarter ResultsMy Profile

    • Hi II,

      You and many other dividend investors love NKE. I’m sure Wold Cup mania is helping showcase a lot of their gear as well. Keep an eye out for VFC. It’s an awesome dividend stock with a very, very long dividend history too. I’d wait for a little pullback before purchasing though. Thanks for your comment.

    • Hi IS,

      You and many others I know regret not pulling the trigger on NKE back in the day. Well, when PE’s come more in line you may get your chance. Personally, I’d go with VFC but not at these current prices. Thanks for stopping by.

    • Hi DL,

      NKE and VFC seem to be the popular picks from the stocks mentioned. One of the reasons that drew me to VFC many years ago was its number of strong brands and recognition it has. Thanks for commenting.

  3. DH,
    I’m long NKE, and looking to purchase VFC on a pull back. I would add UnderArmour (UA) to your list even though it doesn’t pay a dividend. The growth rate is projected to be greater than 20% for the next few years, but it’s ridiculously expensive with a TTM P/E of 77. Really makes NKE and VFC look like bargains in comparison. Nice write-up.
    KeithX

    • Hi KeithX,

      Thanks for the comment. UA has been a great stock performer in the past and is not cheap relative to the other companies mentioned, but as you know, we’re all about dividends here. Still, a great company.

      • Poor choice of words on my part. I didn’t mean that you should have added UA to your list, just that I wanted to show how NKE and VFC were cheap in comparison.

    • Hi LAH,

      I’m glad you are enjoying my theme articles. NKE and VFC are awesome dividend companies. I have held VFC for about 7 years now and plan to keep holing a lot longer.

    • Hi PIP,

      That’s one of the reasons I really like VFC too. The brand power they have is amazing and their items have worldwide recognition too. There is no question that VFC will be around for a long time and with their long dividend history investors looking for income can be rewarded with appreciation and dividend growth. Thanks for your comment.

    • Hi AFFJ,

      I’m with you on VFC for sure. A long time holding of mine, I can’t believe at the growth VFC has experienced in just the past five years. I will be holding VFC for a long, long time. Thanks for stopping bye.

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