If your investment goal is to earn a stable dividend income, whether for retirement or simply to add to existing income, it is important to keep stocks in your portfolio that ensure consistency in distribution of cash. A popular way to achieve this goal is to invest in stocks with dividend growth. In today's work environment, where many employers are phasing out pensions and interest rates on safe-haven assets, such as bonds, remain extremely high. low, this investment strategy may have become even more important. A portfolio of dividend growth stocks can provide a safe retirement income that should keep pace with inflation. In addition, companies that offer regular dividend increases generally have mature and stable companies. Rewarding investors sustainably also tells us a lot about management's long-term philosophy. These are the companies that care about their reputation and their stakeholders. In addition, they value loyal investors.
The major, regular increases in payouts indicate that the company is in control of its own destiny. It would be very unprofessional and harmful to a company's management to increase dividends only to reduce them after a few quarters. these boxes is sportswear giant Nike (NYSE:).
The average dividend growth over the past five years has been more than 10%. With a low payout ratio of just under 30%, along with the stock's current momentum, the Oregon-based clothing and footwear giant clearly has a lot more capacity to increase its dividend.
The stock currently pays a quarterly dividend of $0.275 per share, which at its current share price of $159.52 as of Monday's close, equates to an annual dividend yield of just under 1%.
That may sound thin to many dividend-conscious investors, but the rate of return doesn't tell the full story of why this is a smart dividend game for buy-and-hold portfolios. Of course, that return doesn't look attractive compared to stocks with higher returns in the market. But analyzing stocks based on their returns alone is not a good approach. The best dividend stocks are those whose payouts are increased regularly with no negative surprises. Nike has increased its payout for 19 consecutive years, demonstrating that the company has cash-generating capabilities no matter what stage its economic cycle is in. In addition to dividend stability, Nike is constantly innovating to drive additional growth around the world. its business units. During the pandemic, when many top retailers were forced to suspend their dividends, Nike proved that its company could not only survive but adapt quickly to new market conditions, for example by switching to more robust online sales as its global and mortar stores closed. closed due to lockdowns. In its latest earnings forecast, Nike predicted that sales will exceed $50 billion for the first time this fiscal year, benefiting from accelerating growth in North America and Europe, where sports competitions and other events have resumed. With a significant improvement in Nike's margins as it shifts its sales to a cheaper online model, analysts are optimistic about this heavyweight's stock even after this year's strong rally.
Oppenheimer, which has a target price of $195 on Nike, said in a recent note:
“We believe that NKE has even more leeway. In our view, recent investments are only beginning to pay off and the market is appreciating the significantly improved medium to longer-term EPS power of a digitally powered NKE model."
Bottom Line
For income investors, Nike remains one of the best stocks to buy and hold in a retirement portfolio. With its solid track record of revenue, the company is also in a vigorous growth phase that should lead to greater gains in the value of its shares.
