Question

I need to answers this questions in relation to THE LATEST DATA OF NIKE COMPANY:

- About DIVIDENDS:

• How has this company returned cash to its owners? Has it paid dividends, bought back stock, or spun off assets?
• Given this firm’s characteristics today, how would you recommend that they return cash to stockholders (assuming that they have excess cash)?
• How much could this firm have returned to its stockholders over the last few years? How much did it actually return?
• Given this dividend policy and the current cash balance of this firm, would you push the firm to change its dividend policy (return more or less cash to its owners)?
• How does this firm’s dividend policy compare to those of its peer group and to the rest of the market?

Answer 1

• Considering the trend since 2010 and most preferably in the last decade, Nike has not shown interest in paying more than half its earnings.
• In result, it articulated a high dividend coverage ratio, which depicts its dividend was defensible over this period of time.
• The dividend pay-out ratio refers the portion of Earning Per Share (EPS) that is paid out straightaway to investors in the form of cash dividends. The dividend coverage ratio specifies the number of times a company may pay dividends to shareholders with its EPS.
• Subsequently, Nike sustains a slightly high dividend coverage ratio and has not paid out more than it is earning, it is not likely for it to ruin its highest achievement and cut its dividend.
• Needless to mention here, that Nike has been managing splendidly their dividends section and paying out quarterly cash dividends to its stakeholders since 1985. What is more, it has elevated its dividend for 15 sequential years, which puts it on leap and bound ahead to become an S&P 500 “Dividend aristocrat”. From its 1985 to 2019 later, correcting for its stock splits, Nike paid out quarterly dividends ranging from 0.5 cents per share in 1985 to 88 cents per share in 2019. 3 years down the line, Nike's dividend has greater than before by an average of 15.8% per year.
• As, the Senior executives are handling this in an best possible way since last 35 years, I don’t feel any amendment anytime soon. While we're on the subject, this marks the 18th orthodox year of dividend hike by the company. Noticeably, dividend climbs enhance shareholders’ returns and also raise the market value of the stock. Following this strategy, Nike endeavoured to entice investors and induce them to either buy or hold the stock.

• The existing trailing twelve months (TTM) dividend pay-out for NIKE as of October 31, 2019 $0.88 with a yield of 1%, whereas the weighted average dividend yield of the consumer goods sector is 2.44%. Under Armour, the Nike's major rival, does not provide its investors any dividends, so it does not possess any sort of a dividend yield. Adidas paid out an annual dividend of 85 cents per share and had a dividend yield of 1.88%. Therefore, Adidas pays out more in dividends each year comparatively to its share price than Nike.