VF Corp (VFC) Pays Us in Q3-2016

We logged into Loyal3 today and saw that a dividend check had been paid to us from VF Corp (VFC) in the amount of $48.39 (37 cents X 130.78 shares). This is the fourth dividend payment in a row from VFC of 37 cents so we’re expecting the Q4-2016 dividend payment to include a raise. The question is, just how much of a raise should we expect?

The thing about VFC is that they have a track record of giving out very meaningful double-digit raises for a very long time now as seen below:

vfc-dividend-growth

The last raise was around 15.6% so we’d hope to see something along those lines. When we take a look at VFC’s payout ratio, we see that they like to keep it around 30% but then it seems to spike every now and then:

VFC Payout Ratio History

The problem is that VFC’s stock has been taking a beating having lost 20% in the past year and bringing their yield up to a respectable 2.64%. For the longest time, VFC’s yield sat under 2% and just now it’s hitting a 5-year high. What gives here?

For DGI stocks, we always like to think of yield as an indicator of future dividend growth potential. A high yielding DGI stock can expect low single-digit raises while any DGI stock that yields under 2% typically sees dividend growth in the double digits which has historically been the case with VFC. Now that the stock price has taken a beating and yield has crept back up, we’re going to expect to see a lower dividend growth going for the time being.

Let’s remember that over the past 5 years, VFC’s stock has returned over 270%. Sales growth is slowing now and since that growth has mainly come from acquisitions, investors are wondering what trick is next for VFC. Since our time horizon for holding VFC is forever (unless they stop growing their dividend), we’re not worried in the least. We’ll be happy to see high single-digit growth for our Q4-2016 dividend payment and look forward to hearing some news on future acquisitions that can bring that growth back.

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