The Motley Fool’s Take
VF Corp. is one of the largest apparel companies in the world, with a recent market value of nearly $11 billion. She has a long history of managing major brands, including Fort Worth brand Dickie’s, which she purchased in 2017; vans; Timberland; The north face; and more recently, by acquisition, the famous streetwear brand Supreme.
After a strong year of growth following the pandemic, high inflation weighed on the company’s finances. Sales were down 1% year-over-year in the first half of this fiscal year, with solid growth at The North Face and other brands offset by declines at Vans and Dickies. As a result, the stock price recently fell 61% this year, presenting a great buying opportunity.
By fiscal 2027, management is targeting up to 10% annualized revenue growth, along with faster earnings per share growth – in the mid to high numbers. How will management achieve these goals? The company has reduced its brand portfolio from more than 30 names to 12, targeting high-demand products, such as outerwear, workwear and streetwear.
VF’s dividend recently returned a hefty 7%, and management expects to return approximately $7 billion to shareholders in the form of dividends and share buybacks over the next five years. Long-term investors looking for income should take a closer look at VF Corp.
ask the fool
From RW to Palmer, Alaska: What does the term “prize for perfection” mean?
The madman responds: It is often used to refer to a seemingly overvalued stock. This suggests that investors have high expectations for the company and their enthusiastic buying has pushed the stock price to a high valuation. It also suggests some risk, because if the company makes mistakes or there is bad news, the stock could take a big hit.
You could avoid such a scenario by focusing on “value investing” – looking for healthy, growing companies whose stocks are valued significantly below what you consider their intrinsic value. This creates a margin of safety, which can reduce your risk if the stock price drops.
From PT to South Kensington, Maryland: Are stock dividends really taxed twice?
The madman responds: Usually, yes. Here’s how: Imagine Buzzy’s Broccoli Beer grossing $120 million in sales. After subtracting various expenses, he retains $30 million, which is subject to tax.
With its after-tax profits, Buzzy’s could build a new factory, buy more advertising, hire more employees, buy back some of its stock and/or pay dividends to shareholders, among other things.
All dividends paid by Buzzy’s are generally considered taxable income for shareholders. This is how dividends can be taxed twice – first the company is taxed on its earnings, then after paying shareholders they are usually taxed on those payments as well.
Some prefer that companies create more value for shareholders without paying dividends. For example, companies could buy back certain shares. This reduces the number of shares, increasing each remaining share’s stake in the business – and it does not generate taxable income. (However, buying back shares is a waste when a stock is overvalued.)
school of fools
There are many scammers out there and they like to target older people. The FBI’s latest Elder Fraud Report noted that in 2021, more than 92,000 victims over the age of 60 said they lost $1.7 billion to fraud, 74% more than in 2020. Victims lost an average of $18,246 and 3,133 people lost over $100,000.
Common senior citizen scams involve Social Security. You might, for example, receive an alarming phone call, email or text message suggesting that you are in trouble. It could indicate that your Social Security benefits are about to be canceled unless you take some action – now. You may be pressured to disclose personal information, such as your social security number, date of birth, and/or financial account numbers. The scammers might demand that you pay money immediately.
Each of these things should serve as a big red flag. Know that the Social Security Administration will never call you out of the blue, or threaten to pay you immediately. If there is ever a problem, the SSA may send you a letter – or they may send you an email or text message if you have opted in to such communications. It usually requests payments via online bill payment or pay.gov or in person at one of its many offices. If in doubt, contact the SSA directly and ask.
You can proactively prevent yourself from being the target of a social security scam by signing up for a “my social security” account at SSA.gov. Everyone should do it, even if they are far from retirement. Once you do, you can register at any time and view SSA’s record of your earnings and benefit estimates. You can also update your contact information and manage your benefits online. If you have not created such an account, a scammer could create one for you, with the aim of collecting your benefits.
For more retirement-related advice, check out our “Manage Your Retirement” service at Fool.com/services. It offers social security tips and model portfolios with stock and fund recommendations.
My dumbest investment
From SO, online: My dumbest investment? Well, that was my very first stock investment – a single stock of Amazon.co.uk which I bought for $303. I sold it three months later for $334 and thought I had a good deal. Lesson learned: Play the long game!
The madman responds: Looking at Amazon’s stock price now – it was recently at $89 – some might think you’ve dodged a bullet. But Amazon split its stock 20-to-1 in June. The shares were trading at around $2,450 before the split, and if you then owned one share, you would have ended up with 20 shares after the split, with each share worth around $122.50.
(Splits don’t change the value of your holdings – one stock worth $2,450 or 20 stocks worth $122.50 have the same total value. But going down to a lower price means more investors can afford to buy stocks.)
You probably bought your share long before the split, when the stock hit $2,450. The hindsight is 20/20, and it’s easy to regret selling the share, but if at the time you weren’t confident in Amazon’s growth potential, selling was the right move.
It can be tempting to sell a stock after it has risen slightly and is offering a profit, but always do a little research to see if it looks likely to continue rising for many years.
Who am I?
My roots date back to 1883, when my namesake founded me with $372. In 1901, I was the first grocer to have my own bakeries; I added meat departments after that. Today, based in Cincinnati, I claim to be America’s largest food manufacturer, with annual sales of over $140 billion and over 400,000 employees. I have over 2,700 grocery stores, including supermarkets and multi-department stores, in 35 states and the District of Columbia; my brands include Fred Meyer, Fry’s, Harris Teeter, King Soopers, Ralphs and Roundy’s. My pharmacies fill over 200 million prescriptions a year. Who am I?
Don’t remember last week’s question? Find it here.
Answer to last week’s quiz: Boston Beer Co.