NKE 72.67 (+1.91%)
US6541061031Manufacturing - Apparel & AccessoriesFootwear & Accessories

Last update on 2024-06-25

Nike (NKE) - Dividend Analysis (Final Score: 7/8)

Analyze Nike's (NKE) dividend performance using an 8-criteria system for a final score of 7/8. Evaluate stability, growth, and payout ratios.

Knowledge hint:
The dividend analysis assesses the performance and stability of Nike (NKE) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 7

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

Criteria
Dividend Yield Higher than the Industry Average?
1
Average annual Growth Rate higher than 5% in the last 20 years?
1
Average annual Payout Ratio lower than 65% in the last 20 years?
1
Dividends Well Covered by Earnings?
1
Dividends Well Covered by Cash Flow?
1
Stable Dividends Since the Company Began Paying Dividends?
0
Dividends Paid for Over 25 Years?
1
Reliable Stock Repurchases Over the Past 20 Years?
1

We analyzed Nike (NKE) based on an 8-criteria dividend scoring system. The criteria involve assessing Nike's performance and stability in dividend policies. Specifically, these include comparing dividend yields to the industry average, checking for average annual dividend growth rates above 5%, maintaining payout ratios below 65%, ensuring dividends are covered by earnings and cash flow, stability in dividends over 25 years, and reliable stock repurchases. Nike scored 7 out of 8, showcasing favorable trends like higher than industry-average dividend yields, impressive average annual growth, well-managed payout ratios, and solid coverage by earnings and cash flows. Although there have been some fluctuations, the general positive trend reinforces Nike’s financial health and commitment to shareholder value.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Nike (NKE) appears to be an attractive option for investors focusing on dividend stability and growth. The company's strong historical dividend performance, consistent repurchases, and solid financial health make it appealing, especially for income-focused investors. While there have been some fluctuations and years with lower coverages, the overall trend is positive and suggests a reliable investment. Therefore, it is worth looking into Nike's stock if consistent dividend income and potential growth are your investment priorities.

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?

Dividend yield measures how much a company pays out in dividends each year relative to its stock price. It is a critical indicator for investors focusing on income from dividends.

Historical Dividend Yield of Nike (NKE) in comparison to the industry average

Nike’s current dividend yield of 1.2803% surpasses the industry average of 1.11%, suggesting a more attractive income proposition for income-focused investors. Historically, Nike’s dividend yield has seen fluctuations, dropping as low as 0.4528% in 2003 and peaking at 1.8431% in 2008. The recent increase in yield indicates a favorable trend. Considering Nike’s stock price, the yield reflects substantial growth, showcasing the company’s ability to return value to shareholders even as its stock price rises. This trend is positive for Nike, indicating strong potential for income-oriented investors.

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

Dividend growth rate examines how a company's dividend payouts have increased over time, indicating financial health and shareholder value focus.

Dividend Growth Rate of Nike (NKE)

On average, Nike's Dividend Ratio fluctuated somewhat throughout the past 20 years, ranging from a high of 113.1077 in 2007 to a low of -21.6216 in 2015. Many of these annual changes, such as the significant increase in 2014 and the notable decrease in 2015, highlight the variability in Nike’s dividend growth. The average dividend growth rate across two decades is approximately 22.37%. This demonstrates a healthy, consistent upward trend, which is significantly higher than the 5% benchmark, reflecting positively on Nike’s commitment to increasing shareholder value. However, individual years with dramatic shifts warrant closer scrutiny to understand the underlying causes.

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

An average payout ratio lower than 65% over the last 20 years indicates a company's ability to generate sufficient earnings to cover its dividend payments, ensuring financial stability and potential for growth.

Dividends Payout Ratio of Nike (NKE)

Nike's average payout ratio over the last 20 years is approximately 32.44%, which is significantly lower than 65%. This trend is considered very positive for Nike as it demonstrates the company's consistent ability to generate enough earnings to comfortably cover its dividends. A lower payout ratio suggests that Nike retains a substantial portion of its earnings for reinvestment, which could lead to future growth opportunities. The highest payout ratio observed was 70.38% in 2018, an anomaly compared to other years, potentially due to unusual circumstances during the fiscal year. Overall, Nike has maintained strong dividend coverage, indicative of robust financial health and shareholder value.

Dividends Well Covered by Earnings?

Dividends being well covered by the earnings indicates the company's ability to pay dividends out of its profit. It is essential for a sustainable dividend policy.

Historical coverage of Dividends by Earnings of Nike (NKE)

Nike's earnings per share (EPS) have demonstrated a notable upward trend over the years, increasing from $0.2213 in 2003 to $3.2676 in 2023. This upward trend suggests that Nike has robust profitability. Meanwhile, the dividend per share (DPS) has also seen consistent growth from $0.0387 in 2003 to $1.39 in 2023. The percentage of dividends covered by earnings (represented by EPS/DPS ratio) has been mostly above 0.25, which signifies that Nike generally pays dividends out of its earnings. The coverage ratio roughly represents how many times the company's net income can cover its dividend payments, with higher numbers indicating better coverage and sustainability. The ratio shows that in most years, dividends are well covered by earnings, reflecting financial health and consistent dividend-payment ability. There was a noticeable dip in 2018 when the coverage ratio spiked to 0.7038 due to an unusual drop in EPS, likely from one-time losses or economic conditions. Nonetheless, the general trend shows a stable and well-covered dividend, which is positive.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow is a crucial metric for investors. It indicates how comfortably the company can pay its dividends from the cash flow it generates. The higher the coverage ratio, the more sustainable the dividend is, minimizing the risk of dividend cuts.

Historical coverage of Dividends by Cashflow of Nike (NKE)

Nike's free cash flow and dividend payout figures present an interesting narrative of their dividend sustainability. From 731.5 million in 2003 to an impressive 4.87 billion in 2023, Nike’s free cash flow has grown significantly. However, particularly noteworthy is the relationship between dividend payout amounts and free cash flow. Starting from 137.8 million in 2003, Nike's dividend payouts have increased annually up to 2.01 billion in 2023. When looking at the dividend coverage ratio, the years with ratios above 1 such as 2020 (1.037) signal a robust ability to cover dividends through free cash flow. Conversely, years with lower coverage, such as 2009 (0.36), might cause concern about dividend sustainability. On average, Nike exhibits a stable coverage ratio, though fluctuations do arise due to economic cycles and capital expenditures. Overall, Nike's long-term trend of dividend increases supported by growing free cash flow is a positive indicator for investors seeking dividend stability.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments is crucial for income-seeking investors because it ensures a reliable and predictable income stream. This reliability is especially important for retirees or those who rely on dividends for their living expenses.

Historical Dividends per Share of Nike (NKE)

Nike (NKE) has demonstrated remarkable stability in its dividend payments over the past 20 years. The data shows that Nike's dividend per share has increased consistently from $0.0387 in 2003 to $1.39 in 2023. At no point within this period did the dividend per share drop by more than 20%. For example, during 2008-2009 financial crisis when many companies reduced their dividends, Nike not only maintained but increased its dividend from $0.235 to $0.255. This stability and consistent growth in dividends indicate strong financial health and a commitment to returning value to shareholders. These qualities make Nike an appealing choice for income-seeking investors who prioritize reliability in dividend payouts.

Dividends Paid for Over 25 Years?

Analyze if the company paid dividends for 25 years and why it is important.

Historical Dividends per Share of Nike (NKE)

The data provided shows that Nike (NKE) has been consistently paying dividends since 1998. This marks a 25-year period of uninterrupted dividend payments culminating in 2023. The consistency in dividend payments underscores Nike's stable financial health and its commitment to returning value to shareholders. For instance, dividends per share have steadily increased from $0.03 in 1998 to $1.39 in 2023, illustrating robust financial performance and effective capital allocation. This trend is highly positive for income-focused investors as it indicates reliability and sustained growth in shareholder returns.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases are important because they indicate that the company consistently returns capital to shareholders, increasing the value of remaining shares.

Historical Number of Shares of Nike (NKE)

Nike (NKE) has demonstrated a consistent trend of stock repurchases over the past 20 years. From the data provided, we can see that there have been notable reductions in the number of shares outstanding from 2.14 billion in 2003 to 1.55 billion in 2023. The average annual repurchase rate is -1.5884%. This is a positive sign for shareholders, as consistent share repurchases can often indicate that the company is generating strong cash flows and management believes the stock is undervalued or that repurchasing shares is the best use of excess capital. Notable years with reliable repurchases include 2006, 2007, 2008, and several in the 2010s, showing a diligent commitment by Nike to return value to shareholders through buybacks. This trend is beneficial, enhancing per-share earnings and possibly exerting upward pressure on the stock price.


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