Wednesday, December 27, 2017

DKS DIcks Sporting Goods a compelling buy

I expected to be on vacation but I checked my messages on Seeking Alpha about my post about Foot Locker.    One of readers was equivocating about FL and suggested Dicks Sporting Goods, symbol DKS.

  • Solid Balance Sheet
  • Revenue Growth of over 9% annually
  • Dividend Growth averaging 12% annually
  • Covered call options with a potential 14% return

DKS is not a perfect parallel to FL but for an income investor, however, it is a compelling buy based on my fundamentals.

Yield is a touch low at 2.29% but dividend growth has been consistently in the 12% range annually.  As an income investor I love that metric.  Quarterly dividend in 2017 is $.17 versus .125 three years ago.

Revenue is growing as well and that is hard to find in a retailer.   Over the past three years revenue growth has been a solid 9.4% annually.   Most recent 4 quarters $8,409 versus three years ago $6,599.   With virtually no debt (D/E ratio is .0028) and a P/E ratio (price to earnings) around 12, I see value and income.

Clearly this stock has suffered as the 52 week high is $56.25 and 15 months ago DKS hit $62.88.  Stock holders have really taken it on the chin with DKS.   

The icing on this cake is the covered call I sold as soon as my buy executed.  See the table below.

DKS has not yet announced their next ex-dividend date, but if history repeats that should be about March 8, 2018 which is before the call expires.   Nice 14% upside potential 

I don't have time to flesh out all the details of DKS with all the graphs that make a post pretty but you can look up the key elements.

Good income investing.

M* MoneyMadam

Disclosure:  Long DKS with calls