This Apparel Giant Is Due to Boost Its Dividend

VF (VFC 0.31%) is far from a household name among apparel-makers, but the company has plenty of brands that millions of shoppers around the world know quite well. Shareholders also know VF as one of the members of the elite Dividend Aristocrats, with a 40-year track history of raising its dividends each and every year. With the company having paid four straight quarters of flat payouts, it's almost time for VF to send its dividend higher once more to keep its streak alive.

VF is the company behind North Face, Timberland, and SmartWool, all of which are favorites among hikers and outdoor athletes. But the company doesn't stop there, also offering Wrangler and Lee jeans as well as Vans shoes and JanSport backpacks. VF's size gives it a huge competitive advantage over Columbia Sportswear (COLM 1.00%), even though they share some of the same market emphasis. As Gap (GPS -3.83%) has moved into the athletic apparel segment, VF faces more competition, especially with athletic giant Nike (NKE 0.66%) still looming over the industry with a commanding presence. Let's take a closer look at VF to see whether it's likely to be able to sustain or even improve on its dividend growth.

Dividend Stats on VF

Source: Yahoo! Finance. Last increase refers to ex-dividend date.

Is it time for shareholders to demand higher VF dividends?
VF has been a great holding for shareholders, with gains coming from share-price rises as well as dividend income. The stock has almost quadrupled from its worst levels during the financial crisis and has doubled even from its pre-crisis all-time highs in 2007, riding a wave of interest in outdoor activities that has boosted sales of high-quality products.

VF has achieved much of its success from setting its sights high and working hard to achieve stretch goals. The apparel-maker wants to boost its sales by 50% between this year and 2017, with a corresponding rise in earnings of 67%. VF sees plenty of potential in the high-priced jeans category, where niche retailers have done a surprisingly good job of getting consumers to shell out triple-digit sums for denim pants. Compared with some of its more cost-effective current offerings, VF could profit strongly from a shift to higher-margin high-end jeans.

But arguably the bigger opportunity comes from VF's already strong presence in the high-end outdoor equipment and apparel category. Columbia Sportswear's margins can't stand up to the premium prices that VF fetches for North Face and Timberland products, although Columbia's brand is popular and therefore has potential for future gains. North Face has also started going after the yoga-apparel niche, following in the footsteps of Gap and Nike as they all seek to grab their share of the market that lululemon athletica (LULU -0.03%) pioneered. Especially in light of lululemon's yoga-pant gaffe earlier this year, VF has an opportunity to vault North Face's standing in the niche sharply upward.

VF dividend data by YCharts.

VF's dividend soared higher last year, with the company boosting its payout by a whopping 21%. Yet even though its dividend yield tops those of Nike and Columbia Sportswear, VF's 1.8% yield is nothing to write home about, especially for a member of the Dividend Aristocrats.

When will VF boost its payout?
Four straight quarters of unchanged dividends usually means that investors can expect an increase in the final quarter of the year. Traditionally, VF announces that increase along with its third-quarter results, which this year are expected on Oct. 21.

How much VF will raise its payout is anyone's guess. On one hand, a low payout ratio gives VF plenty of room to push its dividend higher. At the same time, though, last year's outsized increase could lead VF to be more conservative this year. One way to split the difference would be to make the quarterly payout an even $1 per share, which would mark a 15% increase.

In the long run, VF's aspirations run much higher than simply keeping a solid dividend. With hopes of stronger profit growth, VF shares could easily climb even more quickly than its quarterly dividends can grow.

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