Introduction
Analysis of Nike’s dividend over three years period
Nike has been paying dividends to its shareholders every year based on its level of earnings. The three years analysis of Nike’s dividend distribution has been shown in the table below. Nike's dividend per share and earnings per share has increased which also indicates that revenue and profit of the company had increased over that period. (Gibson, 2008) The trend of the past three years projected that the company has improved its market position and was able to provide enough dividend to its shareholders for their investment in the company.
(Source: Nike, Inc, 2014 & Yahoo Finance, 2014)
Compared to Competitors in Its Industry
The comparison of Nike with Adidas suggests that Nike has paid lower that Adidas but the earning per share and price per share is high compared to other competitors in the Apparel Footwear and Accessories Industry. Additionally, Adidas dividend payout ratio is relatively higher than Nike i.e. 56.99% of Adidas while Nike has only 30.49% which suggests that the investors can yield greater returns investing in Adidas than Nike due to its payout ratio. (Brigham & Ehrhardt, 2011) Furthermore, based on the ratios, it can be evaluated that stakeholders and investors have a higher expectation from Adidas. However, the other ratios indicate that financial position is better of Nike than of Adidas. Moreover, Nike’s dividend strategy resembles that of other companies in the same industry as it gives out quarterly dividend regularly based on their profit margin.
(Source: Yahoo Finance, 2014)
Plotting the available ratios for the three year period of Nike
The above graph provides the data for the three-year period for its dividend per share, dividend payout ratio, and dividend yield ratio. The graphs suggest that the financial performance of Nike has escalated over the years as the dividend per share reached 0.93 by 2014, dividend payout ratio reached 30.49%, and dividend yield ratio reached 1.20% from 0.80%. Nike’s financial position enhanced along with its position in its industry. (Hitchner, 2006) The increment in dividend yield ratio in the previous years represent an increase in market price per share of Nike greater than its earnings per share. This also shows that the shareholders have greater trust towards the company, and they prefer to invest in the company to yield higher returns with a lower level of risk.
Estimation for Nike’s Dividend per Share for the coming year and Reasons to reduce the Dividend
Comparing the previous year's performances, the dividend per share for Nike is likely to increase in 2013 as the company’s dividend per share and dividend payout ratio has been continuously increasing over past years. Nike must reduce its dividend in order to save cash for greater projects or to maintain reserve and surplus in case of uncertainties or future losses. (Albrecht, Stice, Stice & Swain, 2007). The understanding situation of Nike’s stock price if the dividend per share and dividend payout ratio keeps enhancing, more investors would be willing to invest in the company, and the trust level of new as well as existing investors would enhance.
Conclusion
Analyzing the above discussion of the financial ratios, it can be understood that financial position of Nike seems better in terms of the dividend regularly provided over the past three years. It can be concluded from the overall analysis that Nike has outperformed Adidas in several aspects. It can also be projected from the dividends and ratios of past three years that Nike can generate better returns than Adidas for the investors with lower risk.
References
Albrecht, W., Stice, J., Stice, E. & Swain, M. (2007). Accounting: Concepts and Applications (10th ed.). USA: Cengage Learning.
Brigham, E.F. & Ehrhardt, M.C. (2011). Financial Management: Theory and Practice (13th ed.). USA: Cengage Learning.
Gibson, C.H. (2008). Financial Reporting and Analysis (11th ed.). USA: Cengage Learning.
Hitchner, J.R. (2006). Financial valuation: applications and models (2nd ed.). USA: John Wiley and Sons.
Yahoo Finance. (2014). Nike, Inc. (NKE). Retrieved December 21, 2014, from https://in.finance.yahoo.com/q/hp?s=NKE&a=11&b=2&c=2010&d=11&e=21&f=2014&g=m
Yahoo Finance. (2014). Adidas AG (ADDYY). Retrieved December 21, 2014, from https://in.finance.yahoo.com/q/hp?s=ADDYY&a=04&b=31&c=2006&d=11&e=21&f=2014&g=m
