VFC Corp reported Friday, and the market didn’t like it… at all!
Price was cut by $9.46 to $63.75, for an almost 13% reduction in its market cap. The reason given was because of a revenue shortfall, resulting in an earnings miss. The principal cause was lower sales of workwear in the oil exploration business, and unfavorable currency exchange rates on overseas sales.
What I will now watch for is to see if the analysts’ consensus of forward-looking earnings estimates for one year out from now start taking a big hit, and possibly threaten the future safety and growth of our dividend income.
VFC announced a dividend increase of $.05 a share from $.32 to $.37 this quarter. This translates into a raise from $1.28 a share per year to $1.48 a share. That $.20 per share annual dividend increase “pay raise” is equal to 15.63%. These are the kind of increases we invest for… but, we sure don’t like the kind of surprise we just got. But, we have to put it in perspective…
If one has some 20 holdings in their portfolio, and one gets whacked like VFC just did for a 13% haircut, just how much pain did we just incur? If, in theory, VFC only represents just a 5% portion of your total holdings, and that 5% piece of your portfolio was just struck down by 13%. Then, the loss amounts to approximately .65% of the whole. That’s just 6 and 1/2 tenths of 1%. How do you feel about that?
Well, no one likes to take a hit and have a loss… but, in investing, it’s inevitable. You can do everything right, and still, you will get some wrong. And, I’m going to watch it awhile. Specifically, I’m going to watch as the EPS line I referred to above gets revised. I want to see how much the current result affects the future outlook. If it should get revised substantially downward, that I think that maybe the dividend safety might be overly hurt, I’ll have to consider selling. If, on the other hand, it’s actually relatively small, and the future outlook is hardly dimmed at all… then, I will begin to think that we have a buying opportunity before us, and might take advantage of this present price weakness to accumulate some more.
I should know better, and develop some kind of an answer beginning in about 1 week. It’ll probably take a couple or three weeks before I know for sure… unless the price itself should continue to spill, forcing my hand. Grateful to have added Nike earlier, it’s been a real bright spot in the same industry group. Perhaps it’s time I went out and bought some more Wrangler jeans!
Here’s to your investing success!
Harold F Crowell