Last update on 2024-06-27

VF (VFC) - Dividend Analysis (Final Score: 5/8)

VF Corporation (VFC) dividend analysis scoring 5/8 based on 8-criteria system evaluates performance and stability for income-focused investors in 2023.

Short Analysis - Dividend Score: 5

We're running VF (VFC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis of VF Corporation (VFC) uses 8 criteria to evaluate the performance and stability of its dividend policy. VF's dividend yield of 5.266% is higher than the industry average but has fluctuated over the years, suggesting underlying stock performance issues. Its dividend growth rate over the past 20 years has been inconsistent, failing to meet the ideal 5% growth threshold. The average payout ratio exceeds the preferred 65%, raising sustainability concerns. While dividends have generally been covered by earnings and sometimes by cash flow, recent trends show inconsistencies. VF has paid stable and consistent dividends for over 25 years, although there was a significant reduction in 2023. Reliable stock repurchases have taken place in 12 of the last 20 years, showing a commitment to returning value to shareholders.

Insights for Value Investors Seeking Stable Income

Based on this analysis, VF Corporation (VFC) has both strengths and areas of concern. Its consistent dividend history and high yield make it attractive for income investors. However, the fluctuating dividend growth rate and high payout ratio indicate potential financial instability. If you're an investor seeking stable and steadily growing dividends, it might be worth considering other options. But if you value the strong historical dividend payments and are okay with some risk, VFC could still be a viable option.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

The Dividend Yield compares the company's annual dividend to its current stock price, indicating how much cash flow an investor might receive for every dollar invested. A higher yield could suggest a good income generation for investors.

VF Corporation (VFC) has a dividend yield of 5.266%, significantly higher than the industry average of 2.3%. This is a positive indicator for income-focused investors, suggesting VFC offers a higher income return relative to its industry peers. However, analyzing long-term trends, VFC's yield has varied from 1.46% in 2013 to a peak of 7.28% in 2022. The increased yield in recent years likely results from a falling stock price (from $99.66 in 2019 to $18.8 in 2023), indicating potential underlying issues in stock performance despite attractive yields.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) is critical for investors seeking a consistent and growing income stream. A DGR over 5% indicates robust financial health and promising future returns.

Based on the given data, the overall Dividend Growth Rate (DGR) over the last 20 years has shown considerable volatility. Especially noticeable is the erratic swing from -50.7463% to 76.3468%, showing a pattern of unpredictability. This inconsistent history and significant negative figures fail to meet the 5% growth threshold, highlighting a sporadic and unreliable dividend policy. Despite occasional peaks, the average at 9.71% is deceiving as it masks unreliable performance. Therefore, this indicates a suboptimal trend for dividend-seeking investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

The Average Payout Ratio is a measure of the proportion of earnings a company pays its shareholders in dividends. Ideally, this should be below 65%, balancing shareholder returns and business reinvestment.

Upon examining the 20-year data, VFC's payout ratio averages at 69.45%, surpassing the ideal threshold of 65%. From 2003 to 2014, it's generally under control, strongly supporting the criteria. However, from 2015 onwards, fluctuations and spikes—like the 2023 ratio of 323.74%—are concerning. This inconsistent trend challenges dividend sustainability, signaling potential financial instability, making it a critical area for investors.

Dividends Well Covered by Earnings?

The ratio of dividends per share to earnings per share measures the sustainability of dividend payouts.

For VF (VFC), we see a general trend where dividends per share are adequately covered by earnings, ensuring the sustainability of payouts. However, fluctuations do exist. A coverage ratio significantly above 1 (1.882 in 2021, for instance) indicates strong coverage, implying dividends are well-supported by earnings. But 2023 shows a sudden drop to a coverage below 1, suggesting dividends are not sufficiently covered by earnings this year. This disparity might raise concerns about dividend sustainability if it continues.

Dividends Well Covered by Cash Flow?

The criterion for ensuring that dividends are well covered by cash flow is to assess the ratio of free cash flow to the dividend payout amount. A high ratio suggests that the company generates sufficient cash to comfortably pay its dividends, indicating good financial health and sustainability of dividend payments.

From 2003 to 2023, VF Corporation's free cash flow and dividend payout amount show a variable trend. In earlier years like 2003, the ratio was relatively low at 0.24, indicating less cash to cover dividends. Periods of improvement were observed, such as in 2020 when the ratio surged to 1.38, suggesting robust cash flow. However, 2023 presents a concerning trend with a negative ratio of -0.77, meaning the company did not generate enough free cash flow to cover its dividend. This poses a risk to the sustainability of future dividend payments.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past two decades are essential for income investors as they ensure consistent and reliable cash flows. This consistency in dividends reflects the company's ability to generate stable earnings and its commitment to shareholder returns.

Analyzing the data for VF (VFC), the dividend per share from 2003 to 2022 shows a generally upward trend, reaching a peak of $2.0396 in 2017. The drop to $0.99 in 2023, however, signifies a sharply fallen divide by ~50% from 2022 dividends. Since the dividends decreased by more than 20% in this particular last year, we can conclude that the recent trend is indeed negative for investors looking for stable payouts over extended periods. Despite years of growth, this drop undermines the company's ability to offer periodic and protected returns, hence posing concerns especially for income investors relying on the VFC dividends.

Dividends Paid for Over 25 Years?

Whether a company has paid dividends consistently for over 25 years

The data shows that VF Corporation (VFC) has consistently paid dividends from 1998 through 2023, marking over 25 years of uninterrupted dividend payments. Despite the significant reduction in dividends per share to 0.99 in 2023 from 2.01 in 2022, the company's history of dividend payments is a strong indicator of its commitment to returning value to shareholders. Maintaining a consistent dividend payment for such an extended period is a positive trend, reflecting operational stability and financial discipline. However, the recent cut should be carefully considered in the context of overall business conditions and company performance.

Reliable Stock Repurchases Over the Past 20 Years?

Evaluation of share repurchase programs and their reliability over an extended period is important as it indicates management's confidence in the long-term value of the company and their commitment to returning value to shareholders.

Over the last 20 years, VF (VFC) has engaged in consistent share repurchases during 12 of those years, such as in 2006, 2008, 2010, and so on up to 2023. The average change in the number of shares is approximately -0.6018%, indicating a reduction in overall shares through buybacks. This positive trend demonstrates a dedication to enhancing shareholder value by reducing the amount of available shares, a sign of confidence in maintaining and growing value per share. However, the repurchasing hasn't been strictly consistent every single year, which could suggest responses to variable market conditions or strategic financial flexibility.