Shares of the apparel chain Hanesbrands Inc. (HBI - Analyst Report) reached 52-week high of $47.71 on Monday Apr 8, following the company’s announcement to initiate a quarterly dividend of 26 cents from Jun 3 that implies a yield of 58.6%.
The closing price of the textile retailer on Apr 8 was $47.65, representing a solid 1-year return of about 69.3% and year-to-date return of about 33.9%. Average volume of shares traded over the last three months stands at approximately 1165K.
Hanesbrands has a solid free cash flow. The company is committed to use the excess cash to return value to its shareholders. 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.
In the recently concluded 2012-fourth quarter, Hanesbrands delivered earnings of $1.07 per share, which more than doubled from the prior year quarter and exceeded the Zacks Consensus Estimate by 7%.
Hanesbrands’ focus on the ‘Innovate to Elevate’ strategy is helping the company boost its earnings. The strategy focuses on value added, higher-priced and higher margin items that can be supplied at lower cost. Revenue growth was fuelled by the undergarment categories like Tagless, Comfort Blend and Smart Sizes which consistently occupy major share in the market.
The company also hinted that some bolt-on-acquisitions are also in the way, as it wants to deploy free cash in some strategic buyout in the near future.
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 48 cents to 51 cents 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 are worth a look include Michael Kors (KORS - Analyst Report), Joe’s Jeans Inc. and Ralph Lauren Corp (RL - Analyst Report). All of them carry a Zacks Rank #2 (Buy).