Happy New Year everyone. I kicked off 2017 with my first stock purchase, V.F. Corporation (NYSE: VFC). VF Corporation has been one of my watchlist stocks the past 6-months. I’ve sold a few options (cash secured puts) on VFC, hoping to get 100 shares on assignment. This hasn’t happened yet, but it might soon.
I bought 100 shares of VFC stock at a per share cost basis of $52.51. My total cash allocation with trading fees came to $5,252. This new stock buy will increase my annual dividends by $168. This is good for me, because I set a 2017 goal of $7,500 in annual dividends, so I need to start buying more stock.
I do have an open option with a strike price of $57.50 expiring on January 20th. Unless this stock moves up $5 dollars, I’ll own another 100 shares at a cost basis of $55.58. This is my cost less the option contract premium.
The 100 shares I bought yesterday was a Buy/Wright purchase. I bought the shares and at the same time I sold a cash covered call. The options details are follows:
- Contract Length: 128 Days
- Opening Fees :$1.10
- Strike Price: $55.00
- Premium: $2.18
- Potential Annualized Rate of Return: 11.71%
- Potential Profit: $216.90
Buy buying the stock and selling a covered call, I effectively reduced my per share cost basis from $52.51 per share down to $50.35 per share. This price reduction assumes I let the contract expire and it closes in my favor.
Overview of VF Corporation
V.F. Corporation (VF) is engaged in the design, manufacturing, marketing and distribution of branded lifestyle apparel, footwear and related products. The Company’s segments include Outdoor & Action Sports, Jeanswear, Imagewear, Sportswear, Contemporary Brands and Other. The Company owns a portfolio of brands in the outerwear, footwear, denim, backpack, luggage, accessory, sportswear, occupational and performance apparel categories. The Company’s brands primarily include The North Face, Vans, Timberland, Wrangler, Lee Nautica, Majestic and Kipling. The Company’s products are marketed to consumers shopping in specialty stores, upscale and traditional department stores, national chains, mass merchants and its own direct-to-consumer operations. Its direct-to-consumer business includes VF-operated stores, concession retail stores and e-commerce sites. The Company’s brands sell products in international markets through licensees, distributors and independently-operated partnership stores. Source: www.schwab.com.
It’s possible that you’ve never heard of VF Corporation. But, you know the brands. VFC owns several billion dollar brands and a handful of smaller brands. VFCs core brands include: Wrangler, The North Face, Vans, Lee, Timberland, Jansport, and Eastpak. All told VFC Corporation owns 23 consumer brands.
VF Corporation Dividends and Growth
- Annual Dividend Yield of 3.16%
- Annual Dividend Rate (IAD) $0.42
- Payout Ratio (TTM) of 50.80%
- Dividend Coverage Ratio (TTM) of 196.84%
- 3 Year Dividend Growth Rate of 20.6%
- 5 Year Dividend Growth Rate of 17%
- 10 Year Dividend Growth Rate of 17.1%
The image below shows the past eight years of VFCs annual dividend. The chart illustrates the company’s dedication to increasing its dividend and paying shareholders back. Not shown, is a recent dividend increase of 14%. This marks the 44th straight year that VF has increased its dividend.
VF Corporation Valuation
The F.A.S.T Graph below shows that VFC is trading just below its normalized P/E Ratio The stock is fairly valued. I generally wait until a stock is undervalued, but in current times with the stock market humming along, I’ll take even value.
Morningstar ranks VFC as a 4-star buy, with a fair value of $73 and S&P Capital IQ is a 3-star hold, with a fair value of $54.70.
What do you think of my VF Corporation stock buy? Are you a VFC shareholder? Are you buying or selling any stock now or waiting for a correction?