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The leading apparel retailer, Hanesbrands Inc. (HBI - Analyst Report), announced that it will initiate its dividend payback policy. In the recently held Investor Day conference call, the company announced that it will pay a regular quarterly dividend of 20 cents per share starting from June 3, 2013 to stockholders of record at the close of business on May 20, 2013. The annualized dividend per share stands at 80 cents per share. The dividend yield is 58.6%.

The initiation of the quarterly dividend is a part of the company’s cash deployment strategy. The apparel chain is settled in a solid free cash flow position with a price to free cash flow ration of 10. Hanesbrands intends to use almost 20% to 25% of its free cash flow to pay dividend.

Winston-Salem, NC-based Hanesbrands is geared to maximize returns to shareholders. Apart from paying in the form of dividends, the company also intends to repurchase shares, although it is yet to formulate its share buyback strategy.

Signs of economic recovery have made share buybacks and dividend increases a common factor among companies with ample cash. Apart from enhancing shareholders’ return, an attractive dividend payment strategy lifts the market value of the stock.

In the conference call, Hanesbrands highlighted its Innovate to Elevate Strategy as a part of boosting its earnings. The Innovate to Elevate strategy aims at using product innovation to enhance the brand value of the company. The company also revealed that apart from paying dividends and buying back shares, the company will use its cash for bolt-on acquisitions.

For the first quarter 2013, Hanesbrands expects sales to be $945 million. Operating profits are expected between $82 million and $85 million for the quarter. Earnings are expected to lie within the range of $0.48 to $0.51 per share.

For full year 2013, the company reaffirmed its sales guidance of $4.6 billion. It expects operating profits between $500 million to $550 million for the year. Earnings are expected to lie within the band of $3.25 to $3.40 per share.

Hanesbrands engages in marketing innerwear, outerwear and hosiery apparel and carries a Zacks Rank #2 (Buy). Other stocks in the same industry that worth a look include Michael Kors Holding Limited (KORS - Analyst Report), Joe’s Jeans Inc. (JOEZ - Snapshot Report) and Ralph Lauren Corporation (RL - Analyst Report). All of them carry a Zacks Rank #2 (Buy).

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