Nike Stock: A Dividend Analysis (NKE)


Nike, Inc. (NYSE: NKE) is the world’s largest textile company – apparel, footwear and accessories. As of November 1, 2019, Nike had a market capitalization of $112 billion.

Nike started as Blue Ribbon Sports in 1964 and was incorporated as Nike in 1971. From humble beginnings when the company had $1,200, it has grown into one of the world’s leading sportswear brands. the largest and best known in the world.

To increase its global expansion, it operates in North America, Western Europe, Central and Eastern Europe, emerging countries, Japan and China. With its growing profits and blue chip status, it is on its way to becoming an S&P 500 aristocrat. A company that is an S&P 500 aristocrat must have increased its dividend for 25 consecutive years and must be included in the S&P index 500.

Key points to remember

  • Nike is a global brand that manufactures sneakers and sportswear for sports professionals and everyday people.
  • The company is poised to be a “dividend aristocrat”, steadily increasing its annual dividend every year since its inception in 1985.
  • In 1985, the year the company went public, it paid a quarterly dividend of $0.05 per share; the last quarterly dividend was $0.88.

Dividend policy and fundamentals

The current trailing twelve month (TTM) dividend payout for NIKE (NKE) as of October 31, 2019 is $0.88 with a yield of 1%, while the average consumer goods sector dividend yield is 2.44%. One of Nike’s main competitors, Under Armour, does not offer any dividends to its investors, so it has no dividend yield. Adidas paid an annual dividend of 85 cents per share and had a dividend yield of 1.88%. Therefore, Adidas pays more dividends each year relative to its stock price than Nike.

Nike has been paying quarterly cash dividends to its shareholders since 1985. Additionally, it has increased its dividend for 15 consecutive years, putting it on track to become an S&P 500 aristocrat. 1985 to 2019 after adjusting for its splits stock, Nike has paid quarterly dividends ranging from 0.5 cents per share in 1985 to 88 cents per share in 2019. Over the past three years, Nike’s dividend has increased an average of 15.8% per year .

Nike Earnings Trends

Nike has consistently generated growing revenues and profits over the past 10 years. Based on 10-year data, it has an average annual revenue growth rate of 9.9%; an average annual growth rate of earnings before interest, taxes, depreciation and amortization (EBITDA) of 10.1%, an earnings per share (EPS) growth rate without non-recurring items (NRI) of 11.5%, a free cash flow growth rate of 9.7% and a book value growth rate of 10.2%.

NKER’s revenues for the quarter ending August 31, 2019 were $10,660B, a 7.16% year-over-year increase. The company’s revenue for the twelve months ended August 31, 2019 was $39.829 billion, a 6.85% year-over-year increase.

Dividend ratios and security

Over the past 10 years, Nike has paid out no more than half of its profits. Consequently, it maintained a high dividend coverage ratio, indicating that its dividend was sustainable over this period. The dividend payout ratio indicates the portion of EPS that is paid out to investors in the form of cash dividends. The dividend coverage ratio indicates how many times a company can pay dividends to shareholders with its EPS.

Nike reported annual EPS of $3.46 for fiscal year 2018. Accordingly, it had a dividend coverage ratio of 3.43 and a dividend payout ratio of 29.19%. It had an annual EPS of $2.97, a dividend coverage ratio of 3.19 and a dividend payout ratio of 31.31% for the fiscal year ending May 31, 2018. Nike reported annual EPS of $2.70 and paid an annual dividend. of 60 cents per share in fiscal year 2013. Accordingly, it had a dividend coverage ratio of 4.5 and a dividend payout ratio of 22.22% for the end of that period. Since Nike maintains a high dividend coverage ratio and hasn’t paid out more than it earns, it’s unlikely to ruin its track record and cut its dividend.

Nike’s growing positive free cash flow solidifies its future for dividend payments. Over the past five years, Nike has paid no more than half of its free cash flow in dividends. Nike had free cash flow of $3.72 billion for the fiscal year ending May 31, 2015, which represents an increase of 75.47% over the fiscal year ending May 2014. As Nike has generated growing profits and stable free cash flow between 2011 and 2015, it has consistently increased its dividends and maintained a dividend payout ratio of between 20 and 30%.

Expected future earnings, income and dividends from Nike

Based on 19 analyst estimates, Nike is expected to report full-year EPS of $4.28, with low and high between $4.15 and $4.42 for the fiscal year ending. ending May 2016. Based on 29 analyst estimates, it is expected to report full EPS revenue of $32.76 billion. Additionally, Nike is expected to record annual revenue of $35.95 billion for the fiscal year ending May 2019. Based on 31 analyst estimates, Nike is expected to record annual EPS of $4.92. for the 2019 financial year.

Therefore, based on its projected annual dividend of $1.12 and its expected EPS for fiscal year 2019, Nike is expected to have a dividend payout ratio of 26.17% and a dividend coverage ratio of 3. .82. This indicates that Nike is unlikely to cut its dividend in the foreseeable future. Nike’s strong cash flow and global growth allow it to continue to pay out and increase its annual dividend to its shareholders.

Nike’s presence in China is expected to help boost the company’s revenue. China is one of the largest sportswear markets in the world, which provides Nike with a strong growth opportunity in this emerging market. Nike’s strong earnings over the years have placed it in a leading position in the athletic footwear and apparel markets. As Nike expands its presence in emerging markets, its profits are expected to increase.


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