Locking in the Dividend - Foot Locker (FL)
Article Submitted By: Sean Riskowitz
Foot Locker (FL) has made a remarkable recovery from the 2008 downturn, producing a 70% return from a year ago. The company now sits on a 3% dividend yield.
Foot Locker Inc (FL) may not be front of mind for many dividend investors but this retailer is carving out a solid niche and is continuing to focus on returning money to shareholders.
The company is a specialty athletic shoe retailer supplying brands such as Foot Locker, Footaction, Lady Foot Locker and Kids Foot Locker.
What is interesting about Foot Locker (FL) for dividend investors is that despite its niche market, the company still offers investors a yield of 3%, proving that decent dividend paying gems can still be found in unexpected places.
Part of the reason for this is the cash generative nature of the business and at the end of October 2010 the company was sitting with around $540m in cash and cash equivalents with net cash of $104m. This is despite paying $36m on it share repurchase scheme, $70m in dividends and making a $30m contribution to its US defined pension benefit scheme.
Foot Locker (FL) is bigger than many investors think. The company has more 3,400 stores in 21 countries including 1,171 in the United States, Puerto Rico, the U.S. Virgin Islands and Guam, 129 in Canada, 518 in Europe, and a combined 93 in Australia and New Zealand. 35 new ones were opened in 2010 and 24 franchise operations were added in South Korea and the Middle East giving the company exposure to these high growth regions.
For the first nine months of the year, the company booked net income of $112m with sales of $3.6bn. At the end of the previous financial year CEO Ken Hicks who took over in August 2009 set the target of turning Foot Locker (FL) into a company which delivered $6bn a year in sales.
In the previous financial year the company served up $468m of positive cash flow before capital expenditures, pension contributions and dividends.
Reporting third quarter results recently the company showed that sales increased 5.4% to $1.28bn, compared with $1.21bn in the corresponding previous quarter.
The more than tripling of third quarter earnings per share versus adjusted third quarter earnings in 2009 was driven by the combination of strong comparable-store sales growth and gross margin rate expansion. Increased sales and earnings reflect meaningful improvements in each of the operating divisions in the U.S., as well as the company’s largest international markets.
Previously when we have written about quality dividend stocks we have focused on three aspects - strong brands, decent cash-flow and competent management, which has shown a willingness to return excess cash to shareholders.
