Portfolio Update
The FiveTwenty portfolio received no dividends in the past week.
| Past Week Dividend | $0 |
| Current Quarter Dividend (Q4 2022) | $657.52 |
| LifeTime Dividend | $6,952.80 |
| Estimated Annual Dividend | $7,218.92 |
The capital allocation for the week of 11/27/2022 to 12/03/2022 will be used to add to our position in VF Corp (NYSE: VFC)
VFC – Position Update
Since our last check-in on VFC in week 22 of 2022, the company reported Q1 2023 earnings on 07/28/2022, and Q2 2023 earnings on 10/26/2022. In addition, the share price decreased 31.6% from $50.18 to $34.34 during the same period.
| TTM | Prev. Update | 10-year median | |
| Dividend Streak | 50 years | 49 years | |
| Yield | 5.82% | 3.95% | 2.3% |
| Payout Ratio | 76.34%1 | 62.07%2 | |
| P/E | 13.111 | 15.732 |
1 computed using adjusted TTM EPS of $2.62 as of Q2 2023
2 computed using adjusted TTM EPS of $3.19 as of Q4 2022
Q2 2023 earnings report
Did VFC’s latest earnings report raise any warning flags?
For Q2 2023, VFC posted a 4% decline in revenue due in large part currency exchange headwinds (revenue was up 2% in constant dollars). Revenue growth across the company’s brands was mixed. The Norths Face up 8% (14% in constant dollars), and Other Brands up 4% (13% in constants dollars) grew revenue in the quarter. While Varns down 13% (down 8% in constant dollars), Timberland down 4% (up 3% in constant dollars), and Dickies down 19% (down 15% in constant dollars) posted declining revenue numbers for the quarter. Overall, revenue decreased 4%, and adjusted EPS were 34.2% lower than in Q2 2022.
| Revenue (in millions) | Net Income (in millions) | Adj. EPS . | |
| Q2 2022 | $3,198.2 | $464 | $1.11 |
| Q2 2023 | $3,080.6 | $(118) | $0.73 |
| % Change | (4)% | – | (34.2)% |
Additional noteworthy developments during the quarter:
- VFC returned $194 million to shareholders in the form of cash dividends during the quarter.
- As part of the earnings report, the company declared a quarterly dividend of $0.51 per share, a 2% increase over the previous quarterly dividend, payable on 12/20/2022 to shareholders of record as of 12/12/2022.
Looking ahead, VFC forecasts an increase of revenue of at least 5% to 6% in constant dollars. Adjusted EPS are expected in the range of $2.40 to $2.50, down from the previous outlook of $2.60 to $2.70. The company also expects capital expenditures to be approximately $230 million for the year.
Thesis
Why are we adding to our position in VFC?
High inflation over the last 12 months have significantly impacted the company’s financial performance. This in turn has led to a plunge in the share price.
However, since VFC still maintains its strong collection of brands, solid balance sheet and commitment to its dividend, we view this as an opportunity to add to our position at fire sale prices.
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