Two Dividend Aristocrats To Watch In 2021

This was a guest post by Value of Stocks.

VF Corporation

The first of the two Dividend Aristocrats we should watch in 2021 is VF Corp. VF Corp. (NYSE:VFC), focuses on high margin branded apparel, footwear and accessories. Their brand portfolio has managed to maintain popularity among individuals of various ages. This in turn allows the company to spend less on constantly marketing their products. Brand recognition has allowed for steady margins. Although the competition in the clothing industry is fierce, by choosing the right brands to include in its portfolio VF has been able to constantly increase revenues, earnings, and dividends. 

VF Acquires Supreme

Last year, VF announced the acquisition of Supreme for $2.1 billion. Supreme has probably been one of the most misunderstood clothing brands of the 21st century. Created in the 90’s in Manhattan, the clothing brand is associated with skating and has gained tremendous popularity among celebrities and the general public. By focusing on limited pieces, Supreme is able to charge very high prices for their products. Customers can only purchase Supreme items by signing up on their website, and waiting for instructions as to which store, they should visit to purchase the item. The company also limits the number of similar items that one customer can acquire. 

Source: Pinterest

Supreme stores are well known for its long lines of waiting customers. The obsession over their products, and the fact that they are limited in quantity explains the brand value. With the pandemic Supremes’ sales probably took a tumble. Given the business strategy, long lines of waiting customers are not an option now. That was probably one of the reasons VF was able to make the acquisition. Despite that over 60% of Supreme sales are digital. Supreme is expected to bring in an additional $500 million of revenue and $0.20 of adjusted earnings per share in 2022. The acquisition makes a lot of sense for VF’s brand portfolio. 

Source: VF Investor Presentation

Supreme is also known to launch items partnering with different brands and has done so in the past with VF. This can now be easily achieved, now that VF owns the brand and multiple other brands. Also, the resale market for Supreme items is huge. Some of the items can fetch higher prices when they are resold. A quick look at eBay shows some items selling for hundreds if not thousands of dollars.

Impact of COVID-19 on VF

Due to the pandemic sales have been anemic for the first two quarters, resulting in losses. As of Q2 FY2021 VF has been able to return to profitability even with revenues down year-over-year and lower adjusted gross margins. Even in this challenging retail environment, management was able to increase sales in China. The company recently reported Q3 FY2021 and companywide performance improved sequentially from Q2 FY 2021.

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Disclosure: Value of Stocks holds no positions in the stocks mentioned. You can read his  more

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