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What are we looking for?

Sustainable dividends from companies with ties to fashion labels thriving in an unpredictable market.

The screen

Ivanka Trump, the U.S. President’s daughter, this week decided to shut down her eponymous fashion line, launched in 2011. She chalks up the closing to her plans to stay in Washington, but boycotts by consumers upset with the Trump administration likely played a role. An even bigger contributor may simply be slow sales in a fickle and hugely competitive market.

Still, several fashion brands have adapted to market changes by boosting online sales and targeting consumer niches. Only a select few offer sustainable dividends.

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Our search started with apparel makers with rising earnings and sound balance sheets.

We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
  • One point if the company is a leader in its industry.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; four to six points indicates average sustainability; and below-average sustainability would be one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated seven stocks. Industry giant V.F. Corp.’s brands include The North Face, Timberland and Kipling. Steven Madden Ltd. designs footwear sporting its own eponymous label but also Big Buddha. Formerly known as Coach Inc., Tapestry Inc. last year added Kate Spade to its family of brands, including Stuart Weitzman. Gap Inc.’s labels include GapKids, Banana Republic and Old Navy. Ralph Lauren Corp. counts Polo and Club Monaco among its designer brands, while Canadian Tire Corp. – a name that might not immediately bring to mind fashion brands – recently bought high-end sportswear maker Helly Hansen. Britain’s Burberry Group PLC sells luxury goods, including the quintessentially English trench coat.

Dividend stocks with ties to fashion brands

Ranking* Company Ticker Div. Sustainability Rating Points Div. Yield (%) Mkt. cap. ($ Bil.) ** Price ($) ** 1Y Total Rtn. (% )
1 Canadian Tire Corp. CTC-A-T Highest 10 2.0 11.9 176.37 22.1
2 Gap Inc. GPS-N Above Average 9 3.3 11.4 30.07 25.5
3 V.F. Corp. VFC-N Above Average 9 2.0 36.3 92.40 51.3
4 Tapestry Inc. TPR-N Above Average 8 2.8 13.8 48.05 -1.0
5 Burberry Group PLC (ADR) BURBY-OTC Above Average 8 2.7 11.8 28.63 27.0
6 Ralph Lauren Corp. RL-N Above Average 8 1.9 10.9 137.17 82.9
7 Steven Madden Ltd. SHOO-Q Above Average 7 1.5 3.2 54.85 33.7

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency.

We advise investors to do additional research on investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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