Here is a press release that I am sure flew under the radar of most investors: "The Buckle (NYSE:BKE) Announces Special One-Time Dividend, a 3:2 Stock Split, a 20 Cent Quarterly Dividend ." and some other stuff.
As far as the stock split, Fools don't care about that. We know it's a non-event in the world of investing.
However, the dividend stuff is pretty interesting. Buckle is sending some serious cash back to shareholders. The special dividend is $3 per share (about $58 million of the company's $141 million stash), to go along with the $0.20 quarterly dividend, which has been rising recently.
Why is this interesting? We'll get to that in a minute. First of all, we need to know who The Buckle is.
The Buckle is a young men's and women's fashion retailer based out of Nebraska. Nebraska? They only know corn and football, right? Apparently not. This company quietly competes with more well-known retailers such as, in alphabetical order, Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO), American Eagle (NASDAQ:AEOS), Gap (NYSE:GPS), and Pacific Sunwear (NASDAQ:PSUN). The thing is, it competes very well against them.
Over the last five years, sales have only grown at about 5% a year, but EPS has grown at more than twice that rate. That's because margins have been expanding over that same time period, and the company has repurchased some shares, as well.
The best thing is that returns on invested capital have been rising. There is nothing better than a company that knows how to allocate capital well to get more and more bang for shareholders' bucks.
To me, here's the interesting part. The company clearly thinks that returning capital to shareholders is better than funding the opening of new stores. Why? It only has about 350 stores in 38 states, mainly in the Midwest, Northwest, and South. So while it seems there's lots of room to grow, maybe it doesn't think its model can compete well in the other regions against the aforementioned competition. Or maybe, given its expansion plans, it doesn't need all the capital it has.
But instead of doing something that looks to be a bit odd with the capital, it's giving it back. It's making what looks to be a decision with its shareholders' best interest at heart. Maybe that's why Marty Whitman and Royce & Associates, two value-investing favorites, own a bunch of shares.
Kudos to the management of The Buckle for making what I think is a very Foolish decision and not growing for growth's sake.
For more on selling clothes to the younger crowd, check out:
American Eagle, Gap, and Pacific Sunwear are Motley Fool Stock Advisor selections. You can find out why with a 30-day free trial of the newsletter. Gap is also an Inside Value pick.
Retail editor and Inside Value team member David Meier is ranked 256 out of 17,112 in CAPS and does not own shares in any of the companies mentioned. You can view his TMF profile here. The Fool takes its disclosure policy very seriously.
