Nike (NKE) Dividend Stock Analysis
The Nike dividend has been paid continuously since 1987 and increased for 15 consecutive years. NKE is included in the Dividend Contenders List.
Current Dividend: $0.72
Dividend Yield: 1.3%
Cash Dividend Payout Ratio: 45%
Market Capitalization: 90 B
Enterprise Value: 92 B
Sector: Consumer Cyclical
Industry: Footwear & Accessories
Nike designs, develops, and merchandises footwear, apparel, equipment, and accessory products. The company offers products in eight key categories: Action Sports, Basketball, Golf, Men’s Training (including Baseball and Football), Running, Soccer, Sportswear, and Women’s Training.
Nike is a global company with over 60,000 employees. Footwear is supplied by approximately 146 factories in 14 countries. Apparel is supplied by over 400 factories in 39 countries.
The company uses distinctive marks including the Nike name and Swoosh Design trademarks to distinguish itself from competitors. In addition, the company uses endorsements from widely recognized athletes to identify with specific key products.
Dividend Analyzer Checklist
(updated July 2017)
Dividend Safety Score (26/33 points)
Dividend Per Share (ttm): $0.68
Dividend Payout Ratio (ttm): 27%
Dividend Per Share (10 Year Growth): 16%
Cash From Operations (CFO) Per Share (ttm): $2.31
CFO Dividend Coverage (CFO / DPS): 3.4 (3/6 points)
Free Cash Flow (FCF) Per Share (ttm): $1.71
FCF Dividend Coverage (FCF / DPS): 2.5 (5/6 points)
Net Financial Debt: $-2356 M
Total Assets: $23152 M
Net Financial Debt / Total Assets: -10% (12/12 points)
Net Financial Debt to EBITDA (ttm): 55%
Total Liabilities to Assets Ratio (Qtr.): 45%
Piotroski Score (1-9) (TTM): (6/9 points)
Profitability & Growth Score (27/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 8.0% (4/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 12.6% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 6.4% (6/6 points)
Operating Earnings Yield (ttm): 5.1% (2/7 points)
Net Income (ttm): $4078 M
Gross Profit (ttm): $15275 M
Total Assets: $23152 M
Gross Profitability Ratio = GP / Total Assets: 66% (11/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 19%
Return on Invested Capital (ROIC): 27%
Return on Invested Capital (ROIC) (5 Year Median): 24%
Return on Invested Capital (ROIC) (10 Year Median): 22%
Valuation Score (10/34 points)
Free Cash Flow Yield (ttm): 3.2% (4/9 points)
EV to EBIT (ttm): 18.4 (3/9 points)
EV to EBITDA (ttm): 16.0 (3/9 points)
PE10: 40.0 (0/7 points)
Price to Sales Ratio (ttm): 2.7
Price to Book Value (ttm): 6.9
Price to Earnings Ratio (P/E) (ttm): 22.1
TOTAL POINTS – (63/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
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Nike’s market leadership is derived from competitive advantages such as size, brand recognition, strategic assets (patents, trademarks, copy rights, etc.), and product differentiation and innovation.
The company has built a reputation with retailers and customers that is unmatched. It’s diverse offering of products over many different sports and geographical locations provides a degree of diversification that only Nike can enjoy.
Extrapolation of Nike’s past growth rates far into the future does not seem reasonable. Nike is so large and already has a leading position in many sports and geographical locations that growth will have to slow at some point.
New product launches from Nike have instant credibility and and almost unlimited marketing resources. Developing markets offer growth opportunities where incomes are rising and sports such as soccer offer increased market penetration.
There are many competitors in the global athletic footwear and apparel markets; most of which operate on smaller margins and offer lower prices than Nike. Economic growth (or lack of) can cause consumers to become more frugal and balk at Nike’s higher prices.
(updated July 2017)
Nike (NKE) is ranked #38 (out of 251) overall and #13 (out of 35) in the Consumer Cyclical Sector by the Dividend Analyzer.
Nike is truly a first class company with a pristine balance sheet and enviable long term profitability and growth metrics. There is only one problem with owning the stock right now: The stock is very expensive! Place it on your watch list and hope for an opportunity to buy at lower prices.
Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth – None
DVB High Income – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None
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