VF Corp (VFC): A Beaten Down Dividend Aristocrat With Strong Brands

Valuation

VF Corp (NYSE:VFC) trades at about 16x forward earnings and offers a dividend yield of 2.7%, which is meaningfully higher than its five year average dividend yield of 1.8%.

While the faster pace of change in consumer apparel markets shouldn’t be understated, companies with excellent brand portfolios and long-standing distribution relationships typically do not come cheap.

Even if VFC doesn’t quite live up to management’s expectations of 10-15% annual earnings growth, the stock still appears to be trading at a very reasonable multiple. We believe VFC will continue compounding earnings at a growth rate between 7% and 11% per year over the next five years, resulting in total return potential of 11% to 14% per year.

Growth is supported by VFC’s extremely large and fragmented markets, track record of growing smaller brands into category leaders, geographic expansion opportunities, and continued mix shift into higher-margin areas (e.g. direct-to-consumer).

Conclusion

VFC’s stock seems somewhat unfairly beaten down today. While current macro trends are far from ideal, the company is still generating excellent growth from its core brands and has demonstrated skill in understanding and evolving with consumer preferences. We don’t see anything that suggests VFC’s long-term earnings power is impaired, but its stock has certainly become much cheaper over the last six months.

With over 40 years of dividend increases, a portfolio of well-known consumer brands, a conservative balance sheet, strong free cash flow generation, and numerous opportunities for continued growth, VFC is certainly a blue chip dividend stock that dividend growth investors should pay attention to.

Disclosure: None