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NIKE (NKE) Raises Dividend, Boosts Shareholders' Wealth

NIKE (NKE) hikes quarterly dividend by 11% to 30.5 cents per share. This marks the company's 20th consecutive year of raising the dividend.

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This story originally appeared on Zacks

Well-known footwear and apparel company, NIKE, Inc. NKE, announced a hike of 11% in quarterly dividend rate for outstanding Class A and Class B Common Stock. Efficient growth strategies and strong cash flows have strengthened the company’s financial base, which is helping it boost shareholders’ wealth.

The latest increase brings the quarterly dividend to 30.5 cents a share, up from the prior rate of 27.5 cents. This marks the company’s 20th consecutive year of raising the dividend. The revised dividend is payable on Dec 28, 2021 to shareholders on record as at the close of business on Dec 6, 2021.  

During first-quarter fiscal 2022, the company paid out dividends worth $435 million. Although the company has been executing quarterly dividend payments, the recent hike instills greater optimism. The move indicates the company’s commitment to deliver long-term shareholder value. It also reflects the confidence in its financial position and the ability to generate sufficient cash flows.

In the context of share repurchase activities, NIKE bought back shares worth $742 million during the first quarter. The company completed share repurchases of 4.8 million shares under its $15-million program approved in June 2018. As of Aug 31, it repurchased 54.8 million shares for $5.4 billion under the aforementioned program.

Speaking of cash position, NIKE ended the first quarter with strong liquidity, which included cash and short-term investments of $13,695 million. The figure was up $4.2 billion from the last year’s levels. As of Aug 31, the company had no current portion of long-term debt. The latest dividend hike reflects the company’s dividend yield of roughly 0.7%, based on the closing share price of $171.35 on Nov 18. These aspects make the company’s dividend payment sustainable.

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Strategic Growth Efforts Bodes Well

NIKE has been progressing well with its Consumer Direct Acceleration strategy to fuel growth. The company is gaining from an efficient digital ecosystem, which comprises its online site as well as commercial and activity apps. During the first quarter, digital revenues in the NIKE Brand were up 29% year over year on a reported basis. The company expects revenues in fiscal 2022 and beyond to benefit from robust growth in digital sales. The company is also benefitting from reviving traffic conditions across stores, with leniency in pandemic-led restrictions. Efforts to boost assortments, including innovation, have been yielding.

This Zacks Rank #5 (Strong Sell) company has been battling supply chain challenges and factory closures due to COVID-19, which led to product shortages and is hampering the mobility of products. The company anticipates such delays in transit times to continue throughout fiscal 2022. Moreover, elevated freight and rising selling and administrative expenses have been eclipsing the company’s margin growth.

We expect prudent growth efforts and favorable market conditions to continue supporting the company and help it overcome the aforementioned headwinds. That said, shares of the company have moved up 2.2% in the past three months compared with the industry’s rise of 2.3%.

Here are 3 Key Stocks for You

We have highlighted three better-ranked stocks in the Consumer Discretionary sector, namely lululemon athletica inc. LULU, PVH Corp. PVH and Funko, Inc. FNKO.

lululemon, a well-known athletic apparel company, has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 25.2%, on average. Shares of the company have increased 18.9% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for lululemon 's current financial year sales and earnings per share (EPS) suggests growth of 42.2% and 59.8%, respectively, from the year-ago quarter's figures. LULU has a long-term earnings growth rate of 20%.

PVH Corp, which specializes in designing and marketing branded apparel and accessories, currently flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 177.5%, on average. Shares of the company have increased 16% in the past three months.

The Zacks Consensus Estimate for PVH Corp’s current financial year sales and EPS suggests growth of 28% and 540%, respectively, from the year-ago period’s levels. PVH has a long-term earnings growth rate of 59.1%.

Funko, engaged in manufacturing a wide range of consumer products, currently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 110.7%, on average.

The Zacks Consensus Estimate for Funko's current financial year sales and EPS suggests an increase of 48.3% and 240.5%, respectively, from the year-ago period’s tallies. FNKO has a long-term earnings growth rate of 40.4%.



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