What are we looking for?
Sustainable dividends that tap consumer enthusiasm for golf, the National Hockey League and National Basketball Association playoffs, etc.
Tiger Woods thrilled fans last weekend with a fifth Masters win. He’s now just three majors behind Jack Nicklaus’s record of 18.
Nike Inc. stuck with Mr. Woods through his 11-year dry spell between major titles, but other golf-related stocks should also benefit. Beyond that, sporting goods demand remains high, spurred by professional athletics.
From a list of U.S. and Canadian sports-equipment makers and retailers, we singled out well-established dividend payers with growth potential. We then applied our TSI Dividend Sustainability Rating System; it awards points to companies based on these 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 for industry leaders.
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, Average sustainability is four to six points and below-average sustainability is 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: Nike leads in sporting equipment and apparel along with Germany’s Adidas AG. Callaway Golf Co. manufactures equipment seen on courses worldwide. Dick’s Sporting Goods Inc. is a major U.S. chain, with Foot Locker Inc. another retail leader, known for its brand-name apparel. Focused on this country, Canadian Tire Corp. Ltd. sells sports gear across its chains, including SportChek, Sports Experts, Pro Hockey Life and National Sports. Toronto-based Fairfax Financial Holdings Ltd. sells insurance, but also owns the Bauer hockey brand (whose skates, for example, are worn by roughly half of the Toronto Maple Leafs’ roster, according to Geargeek.com). In addition, the company holds a majority interest in the Golf Town and Sporting Life retail chains.