There are an immeasurable number of companies that rely on discounting to drive customer traffic. One notable example we’ve covered frequently is teen-clothing retailer Aeropostale, Inc. (NYSE:ARO). When economic times are booming, its inventory moves quickly enough that its deep discounts go unnoticed. The past few years, though, have been difficult, with the company unable to move unwanted merchandise even at steep discounts.
Then there are the companies that live and die by their brand image. Coach and high-end jewelry retailer Tiffany & Co. (NYSE:TIF) fall into this category. By refusing to discount, they maintain the high integrity and value of their product on a consistent basis and give the consumer ample reason to buy now as opposed to waiting later for a better price.
Another aspect where Coach is cashing in is in international markets. Like Michael Kors, which has somehow managed to find success in its European expansion, Coach is finding incredible success overseas in China. What’s even more interesting about its overseas success is that it’s come as it focuses more intently on its male customers, which, overseas at least, are providing some of the biggest boost to its bottom line.
We also can’t overlook Coach’s improvements in its direct-to-consumer business in North America, which showed 8% growth from the previous quarter. Consumers are expecting today’s retailers to provide an enjoyable and easy-to-navigate digital experience, and it appears that Coach is hitting on all of those notes.
It’s payback time!
What really stands out to me, though, aside from Coach’s comparative advantages relative to its peers, is its nicely sized share repurchase program and shareholder-friendly dividend, which has grown by leaps and bounds since it was initiated in 2009.
In October, Coach announced a share repurchase program worth $1.5 billion that is effective through the end of June 2015. Based on Friday’s closing price, that’d translate to approximately 9% of its outstanding share count. Although buybacks don’t put money directly into shareholders’ pockets, it makes existing shares worth more, as profits are divided into fewer outstanding shares.
Even more impressive is Coach’s phenomenal dividend growth. Since 2009, and including the 12.5% boost to its annual dividend that it announced this week, Coach’s quarterly payout has increased from just $0.075 in 2009 to $0.3375 in its upcoming quarter — just your run-of-the-mill 350% four-year increase!
Source: Nasdaq.com.
*Assumes $0.3375 per quarter payout for remainder of 2013 and 2014.
What’s more, even with a $1.35 annual payout, Coach is paying out only 36% of its projected 2013 EPS, leaving plenty of room for business and dividend expansion.
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Coach is an absolute marvel in the retail world. This isn’t to say that it isn’t going to have an occasional hiccup as consumer spending habits and tastes shift, but there are few companies suited to adjust to these shifts with such swiftness and success as Coach. In addition to delivering the right product for a clearly defined price, Coach sets itself apart from its peers with a rapidly growing dividend and top-tier share repurchase program aimed at improving shareholder value. With a 2.4% yield, a well-recognized brand name, and a projected five-year growth rate of nearly 13%, I think Coach is a dividend you can trust for the long run.
The article 1 Great Dividend You Can Buy Right Now originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Coach.
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