Foot Locker Delivers Another 10%-Plus Annual Dividend Hike (FL)

After eight consecutive years of annual dividend growth, Foot Locker (NYSE:FL) rewarded its shareholders with another double-digit-percentage annual dividend hike.

Foot Locker initially started distributing dividends to its shareholders in 1990. However, the retail sector’s struggles affected Foot Locker as well and the company eliminated dividend payouts in 1995. After getting its business on a stronger footing, the company reintroduced dividend distributions in January 2003. In January 2004, Foot Locker delivered a 50% annual dividend hike and a 25% annual dividend hike the following January.

While the annual dividend hike rates declined as the dividend amount rose, the company failed to deliver an annual dividend hike just once since 2003. Foot locker skipped the annual dividend hike in the aftermath of the 2008 financial crisis. When many equities had to cut or eliminate dividend distributions, Foot Locker managed just to delay one annual dividend hike and paid the same $0.60 in 2009 and 2010, before resuming dividend hikes in 2011.

Foot Locker’s current dividend payout ratio of 30% is just marginally lower than the company’s own 32% five-year average yield. This low payout ratio indicates that the Foot Locker’s dividend distributions are currently very well covered by the company’s earnings. Additionally, the low payout ratio also communicates to investors that the dividend distributions and the company’s ability to maintain its annual dividend hike streak into the near future should be safe, barring any unforeseen problems.

Investors, whose independent research confirms that the Foot Locker annual dividend hike streak and share price recovery fit with their portfolio strategy, should consider acting quickly. All investors, who wish to claim eligibility for the next round of dividend distributions, must claim Foot Locker stock ownership prior to the April 17, 2019, ex-dividend date. The company will distribute the next dividend payment on May 3, 2019, to all eligible shareholders.

Foot Locker, Inc. (NYSE:FL)

Founded in 1879 and headquartered in New York, Foot Locker, Inc. operates as an athletic shoes and apparel retailer. The company operates in two segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment retails athletic footwear, apparel, accessories and equipment through various store formats, including Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction and Runners Point. As of April 2019, the company operated 3,220 stores in 27 countries, including North America, Europe, Australia and New Zealand. The Direct-to-Customers segment sells athletic footwear, apparel, equipment and team-licensed merchandise for high school and other athletes through catalogs and more than a dozen brand websites.

The company’s current annual dividend hike increased the quarterly dividend payout amount 10.1% from $0.345 in the previous period to the current $0.38 payout. This new amount corresponds to a $1.52 annualized distribution and a 2.5% forward dividend yield. Foot Locker’s current yield is nearly one-third higher than the company’s own 1.9% average yield over the past five years.

In addition to exceeding its own five-year yield average, Foot Locker’s current yield is more than 30% above the 1.93% average yield of the overall Services sector. Furthermore, Foot Locker’s current yield is also 23.3% higher than the 2.04% simple average yield of the company’s peers in the Apparel industry segment.

Foot Locker’s current payout increase is the company’s ninth consecutive annual dividend hike since failing to raise its dividend payout in 2010. Over that period, the company enhanced its annual payout amount more than 150%, which corresponds to an average growth rate of nearly 11% per year.

The sharp hikes in the few early years since reintroducing dividend distributions in 2013 contributed to an even higher average growth rate over the longer term. Even with the one missed boost in 2010, Foot Locker increased its total annual dividend payout nearly 13-fold since January 2003. This pace of advancement is equivalent to an average annual rate of 17.2% over the past 16 years.

The company’s share price suffered a drop of more than 60% in 2017, which limited the three-year total return to less than 5%. However, a share price resurgence in 2018 and 2019 combined with the rising dividend payouts for a total return of 33% just over the past 12 months. Even with the 2017 decline, the company delivered a 45% total return over the past five years.

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