Safe Dividend Stocks for the Next Market Crash: Hanesbrands (HBI)
HBI Dividend Yield: 3%
3-year Annual Dividend Growth Rate: 44.2%
Famous underwear retailer Hanesbrands Inc. (NYSE:HBI) has fallen victim to the market’s hatred of the retail industry, which has sent shares down about 30% in the past year. However, Hanes has continued to show solid top- and bottom-line growth, with sales up 5% in 2016, and EPS soaring 32%.
And like a few other dividend stocks in the retail sector, Hanesbrands’ difficulties have plumped up the yield.
Thanks to a successful history of acquisitions, as well as supply chain optimization (economies of scale) from its 52 global, low-cost factories, Hanes has been able to grow its earnings and free cash flow per share by 15.8% and 45%, respectively, on an annual basis over the last five years.
Better yet, the company is doing well growing its online sales business, making its distribution network far more agnostic (i.e., Amazon-proof) than many other retailers.
Meanwhile, continued strong growth in its sportswear lines — which make up 50% of its sales — should allow the company to generate around 3% organic sales growth, driving operating income growth of 6% and EPS growth of 7% to 8%, courtesy of steady buybacks.
And with a very low payout ratio (32% of FCF over the past year), HBI should be able to reward dividend lovers with ongoing long-term payout increases of 9% to 10%. That doesn’t account for any potential faster growth through acquisitions that the company may make over the years either.