Using a methodical process for dividend investing can help investors find companies with lasting payouts and sound financial conditions. The "Best Dividend Stocks" selection method centers on three main factors: a high ChartMill Dividend Rating (7 or above) to find leading dividend payers, along with good Profitability and Health Ratings (both 5 or above) to confirm the company can support its dividend through different market environments. This measured method helps sidestep high-yield pitfalls while focusing on companies with dependable income prospects.
NIKE INC -CL B (NYSE:NKE) appears as a noteworthy option via this selection process, especially for investors looking for dividend expansion instead of the highest present yield. The athletic apparel leader displays several traits that match with sound dividend investing ideas.
Dividend Quality and Lasting Power
Nike's dividend characteristics display both positive and cautionary points that dividend investors should note:
- Dividend Growth Record: The company has raised its dividend for a minimum of 10 straight years, showing management's dedication to giving capital back to shareholders
- Notable Growth Pace: With an average yearly dividend growth of 10.70% over recent years, Nike greatly exceeds inflation and provides real income expansion
- Present Yield Points: The 2.42% yield is a bit under the industry average of 3.36% but matches the S&P 500 average, indicating the company's expansion-focused method
The lasting power review shows a varied situation. While the present payout ratio of 80.59% seems high, the company's earnings are expanding more quickly than its dividend, indicating this ratio will likely get better with time. This pairing of a solid dividend growth record with lasting future outlook makes Nike attractive for investors who value dividend expansion over an instantly high yield.
Profitability Base
Nike's sound profitability supplies the necessary base for continuing and expanding its dividend distributions:
- Steady Profit Creation: The company has sustained profitability over the last five years with positive operating cash flow every year
- Good Return Figures: Return on Equity of 21.50% and Return on Invested Capital of 10.87% both place in the leading group of industry counterparts
- Competitive Margins: A profit margin of 6.23% does better than 81% of textile and apparel companies, although gross margins indicate potential for enhancement
These profitability figures are important for dividend investors since steady earnings and cash flow creation directly back reliable dividend payments. Companies with sound profitability can finance dividend expansion without weakening their operational requirements or financial condition.
Financial Condition Evaluation
Nike's financial condition markers give assurance about the company's capacity to handle economic cycles while maintaining dividends:
- Sound Liquidity Standing: Current ratio of 2.19 shows sufficient short-term financial adaptability
- Manageable Leverage: Debt-to-equity ratio of 0.59 indicates measured debt use without extreme financial exposure
- Bankruptcy Exposure: Altman-Z score of 4.22 points to very low bankruptcy exposure and financial steadiness
For dividend investors, financial condition is especially significant because companies with sound balance sheets can maintain dividends during economic slumps when less robust competitors could be pressured to reduce payments. Nike's share repurchase plan, shown by decreased shares outstanding over recent years, further shows structured capital distribution.
Valuation and Expansion Setting
While Nike trades at higher valuation multiples compared to the wider market, several elements help frame this pricing:
- Earnings Multiple: P/E ratio of 31.50 is more than the S&P 500 average but matches industry counterparts
- Expansion Projections: Analysts forecast 16.96% yearly EPS growth, which could support some valuation premium
- Future Looking: The forward P/E of 24.29 seems more sensible relative to growth projections
The company's recent revenue decrease of 7.14% and EPS fall of 44.44% represent short-term difficulties rather than fundamental problems, with analysts predicting a solid recovery in earnings growth. For dividend investors, this expansion possibility supports future dividend raises despite present valuation questions.
Investment Points
Nike offers a persuasive case for dividend expansion investors who value rising income streams over the highest present yield. The company's outstanding dividend growth record, paired with sound profitability and financial condition, forms a base for lasting dividend expansion. While the present yield may not draw income-focused investors, the steady double-digit dividend growth pace provides appealing compounding possibility for long-term investors.
The high payout ratio requires observation, although the anticipated earnings growth should ease lasting power questions over time. Investors should balance the premium valuation against Nike's solid brand position, global reach, and recovery possibility in determining if the present price provides sufficient safety margin.
For investors searching for comparable dividend chances, the Best Dividend Stocks screen gives more companies meeting these structured criteria. The full fundamental analysis report for Nike provides more detailed views into the company's financial position and dividend lasting power figures.
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This article gives unbiased examination using publicly accessible information and is not meant as investment guidance. Investors should perform their own investigation and think about their personal financial situations before making investment choices. Past results do not assure future outcomes, and dividend payments are subject to company judgment and market factors.
