VF Corp (VFC) Stock Analysis

Today is a stock analysis in an industry not traditionally covered by most from articles that I read and see.  Everyday we put clothes on, go to outlet malls and department stores to look at the new fashion that is available and what new styles are “in season”.  What about if you could own a company that makes these items that the majority of the public wear, day in and day out.  Also, what if they also paid you a very solid dividend?  Let’s check this out…

vf-corp

VF Corp (VFC) Background

Wear these brands that I have listed below?

northface wrangler rr lee

Well, welcome to VF Corp (VFC)!  From Google, “V.F. Corporation (VF) is engaged in the design, manufacturing, marketing and distribution of branded lifestyle apparel, footwear and related products. The Company’s segments include Outdoor & Action Sports, Jeanswear, Imagewear, Sportswear, Contemporary Brands and Other. The Company owns a portfolio of brands in the outerwear, footwear, denim, backpack, luggage, accessory, sportswear, occupational and performance apparel categories. The Company’s brands primarily include The North Face, Vans, Timberland, Wrangler, Lee Nautica, Majestic and Kipling. The Company’s products are marketed to consumers shopping in specialty stores, upscale and traditional department stores, national chains, mass merchants and its own direct-to-consumer operations. Its direct-to-consumer business includes VF-operated stores, concession retail stores and e-commerce sites. The Company’s brands sell products in international markets through licensees, distributors and independently-operated partnership stores.”  Talk about great brands that I think I own, let’s see, Nautica, North Face, just to name a few.  They have over $12 billion in sales, with net income at $1.2 billion, which is amazing.  The competition may be Nike (NKE), but all of these brands are sold in stores, such as Kohls (KSS).  Very interesting here.

Further stock details that I’d like to provide relate to performance this year and market capitalization.  This year to date, the stock is down 13%, whereas, the entire market is up (S&P 500) 5% essentially, and the industry of cyclical consumer is down 8%.  This points that VFC has gotten beat up more than other portions of the market and their own.   Additionally, VFC has over $22B in market cap, pretty massive.  Oh and a wonderful, minor, detail… they are a dividend aristocrat!

VF Corp (VFC) Stock Analysis

1.) Dividend Yield: Very fun and interesting here, VFC is yielding 3.10% on the 10/26/16 market close price.  Oh and guess what?  Their 5 year dividend yield average is 2.00%.  AKA why the heck aren’t we buying this opportunity here?  We are nuts, this is a great display of undervaluation of a dividend stock that I’ve seen lately.

2.) Dividend Increases: Over 43 amazing years!  Guess what they did 6 days ago?  Yep – increased their dividend.  They increased their dividend 13.5%.  This is incredible and is much higher than my overall portfolio growth rate, that is for certain.  Not a bad little history and track record here.  However, there are still a few more metrics to look at.

3.) Payout Ratio: Of course, during these uncertain economic times, I am very hard on why this is a very important piece to any dividend stock analysis.  Earnings per share based on 25 analysts have current year projected at $3.14.  With a dividend of $1.68 per year, this sits at a 53.5%, or smack dead in the middle of the 40-60% range that we typically prefer.  Forward EPS for 2017 is established at $3.45, which then leads to a 49% ratio, overall, very good and leaves plenty of room for further growth.  Comfortable where this sits.  

4.) Dividend Growth Rate: Now, we know that dividend increases impact your overall portfolio in a substantial fashion, especially with this company going on 43+ years.  How does VFC stand in their rate increases?  Well, a 13.5% increase was just announced, but how does this stack up?  Their 3 year growth rate is around 19%, and 5 year is around 18%.  This is very strong, however, the 13.5% shows signs this may be slowing, especially as they hit closer to that 60%+ area of the payout ratio.  If they continue, I can see the dividend increasing another 5 cents per quarter/20 cent increase per year going forward.  I feel like their dividend growth rate is strong and can be solid going forward in the higher single to low double digit rates.

5.) Price to Earnings: The stock closed today at $54.11.  Therefore, based on current year EPS projections, the P/E ratio is 17.2, which is still far below the overall market on average.  If you consider their forward EPS expectation of $3.45, then we are looking at a forward P/E ratio of 15.68.  This is not bad at all and also shows signs of undervaluation.

Great stock up there, right?  In a tough position here, great yield, it is yielding over 50% higher than the 5 year average, a P/E ratio that is superb, in the middle-of-the-road payout ratio and their dividend increases are phenomenal.  Additionally, love some of the brands and believe they do carry a “Brand” loyalty – as I know quite a few friends and family members that live by a few of them, and switching to a different brand where they already know it fits and feels right, is tough for them to do.  This is a very fun research piece for me to do.  I own plenty of Nautica items and have a few North face pieces, and my friends have a plethora of North Face attire, almost countless pieces.  Very interesting.

Conclusion on VF Corp (VFC)

Overall, I do love the company, hands down.  Is it overvalued?  No.  Is it undervalued, though?  Slightly, but I don’t know if it is enough, yet.  I would like it in the $52 range, to be honest, as that brings it into the low 15 range for a price to earnings ratio.  This would also bring it up higher to 3.25% range on the yield metric.  Am I too stubborn?  There is potential here, but I also have time, as their ex-dividend date isn’t until early December, in order to grab their end of the year/December dividend.

What about you?  What do you think of this stock?  Do you own these brands of clothing?  Are you currently wearing them while reading this article?  Please share your thoughts on this company!  Much appreciated and talk soon.  Oh and… ROLL TRIBE!

-Lanny

DISCLOSURE: I DO NOT RECOMMEND ANY DECISION TO THE READER OR ANY USER, PLEASE CONSULT YOUR OWN RESEARCH. THIS IS ACTUAL DATA, ANALYSIS, HOWEVER I BASE NO INVESTOR RECOMMENDATION.  THANK YOU FOR YOUR UNDERSTANDING.
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16 thoughts on “VF Corp (VFC) Stock Analysis

  1. Nice analysis. I am averaging my way down. I bought some in the high and mid 50s. I will be glad to buy more when it reaches 50 or below. Though the branding (moat) is strong, it is in the consumer retail space which means it will have its ups and downs.

    • D4s,

      AWESOME. Pumped to see a few shareholders here. Definitely has its ups/downs, but the years and consistency with VFC is key. If they hit $52, will be very enticing to me, so yours is $50, eh? Nice job averaging down, sounds like a solid strategy!

      -Lanny

  2. Current ratio is 1.52 which is okay but their quick ratio is a bit low 0.69. Price to book is high as their book value is around $11.

    All the other stuff looks pretty good as you have shown above.
    Thanks for bringing this stock to my attention. Putting it on my watch list.

    • Divi Cents –

      Great stats to point out. That’s a great current ratio, but yes, you do want the quick to be above 1 as well if you can.

      Of course – I added it to my watch list as well, no immediate purchase, as I let things shake out for now.

      -Lanny

  3. I think VFC is the best company in a business that I’d rather stay away from entirely. The apparel industry is too affected by changing tastes and by weather, neither of which I’m in a position to predict. There is also a lot of price competition from struggling companies that are forced to offer big discounts.

    • Brian –

      Good take, of course, need the other side of the coin and you definitely brought it. We have seen what happened with American Eagle/Aeropostale/Abercrombie – all have gone through enormous cycles and some that may not have been able to/will never get back on track. Think there is any differentiation with VF Corp? To me, they are more of a brand-housing company, instead of a Brand themselves, like the others that have failed. They have a portfolio as opposed to one niche, you know? That’s what’s different here, I would say, as it is a conglomerate of great brands with ALL sorts of fashion – Rock/Republic is COMPLETELY different than Nautica. Just a few more cents. The industry, as you stated, is difficult, but the company may be built to handle the ride. Eh?

      -Lanny

  4. Lanny,
    Really big fan of VFC at these prices. I plan to do some averaging down next month via Loyal3 where you can get them with no fee. I plan on adding both them and NKE on that platform at some point, but I hope they both become a little sweeter in price. They are both solid companies, that I see weathering almost any storm extremely well.
    – Gremlin

  5. Well, VFC hit the magic 3%+ yield which got me interested. I like this name a lot long term and plan to keep it for the foreseeable future and add to it if it stays at these depressed levels. In fact, I just picked some up last week as a new position in my ROTH. I already hold it in my taxable account since 2007. Thanks for the analysis. Yes, I’m wearing my Vans as I type this. Damn Indians. Leave some for the rest of the country. You already got Cavs. Go Browns!!!

  6. Thanks for the analysis! I’m also a fan of the company and want to point out that the leverage (debt/EBITDA) is also relatively low (2016: 0.7, 2017: 0.6, 2018: 0.25).
    The chart suggest further down side, so I’m also on the sidelines.

    Cheers
    DivRider

  7. Nice analysis guys. I recently purchased my first stock, with Signet Jewelers, and it’s good to see what you use for analyzing a stock. Granted I will have to do more of due diligence for the next purchase. Keep it up.

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