Cherokee - A Fashionable High Dividend Stock

Is it possible for fashion and high dividend stocks to intersect? In the words (or letters) of the acronym-obsessed, OMG!

Fashion-savvy investors searching for dividend stocks may be happy to discover that, with its 9.5%-plus current dividend yield, apparel licensor Cherokee has, by far, the highest dividend in its apparel peer group. CHKE just announced its 24th consecutive quarterly dividend, which they maintained at $.50, and has paid out over $125 million in dividends to shareholders since 2003. Their 5-year dividend growth rate is 46.14 %, vs. the industry average of only 3.29%.

Their management effectiveness ratios, and revenue/employee dwarf their competition also:

	Cherokee (CHKE)	Industry
Return on Equity	53.58	9.53
Return on Investment	67.22	4.83
Return on Assets	38.14	4.06
Revenue/Employee	$1.68 million	$.38 million

Cherokee also has a very strong balance sheet, with no debt.

The company has strong international exposure, in Eastern Europe, UK, Asia, Mexico, and Canada.
Like any US company with overseas earnings, a strong dollar can sometimes hamper earnings, as it did in CHKE's most recent quarterly report, pushing down income by 7 cents/share. Conversely, if the US dollar eventually weakens, as many economists are predicting, CHKE should benefit.

Its 2 biggest customers are Target (TGT), in the U.S., and Tesco (TESO), internationally. CHKE is in a highly competitive field, loaded with tough competitors such as Gap (GPS), Iconix (ICON), VF (VFC) and Nike (NKE), and must continue to innovate, and diversify its customer and geographical base, in order to grow.

CHKE opened Friday at $20.25, and has a P/E of 13.22, well below its 5-year P/E high of 20.53, and the industry average P/E of 20.06. Like many stocks, it's had quite a run up from its 52-week low, ($10.38), and currently sits just 14.47% below its 52-week high of $23.57.

So, if you're a slave to fashion, looking to turn your fashion sense into dividend "cents", CHKE might just be one of the best stocks to buy on a pullback.

Disclosure: Author is not long shares of CHKE, but is a fan of Project Runway.

Comments

[whidbey]

This stock is part of the pretense that consumers are on a recovery path worldwide. That is not supported in the facts on US consumer behavior, or the reports of Target, for example, But! it is absolutely amazing that it can compete in Mexico and Asia. Finally, No debt. What do they do steal the goods? Does this come under the heading of it seems to good to be true, maybe it is not true?

Thanks very interesting business.

2009 Sep 05 04:38 PM

[bminfo247]

Clothing sellers popular amoung the back to school crowd, such as Cherokee jeans and Guess, are discussed at Yahoo Finance, in the context of tighter inventories and higher margins:
finance.yahoo.com/news...

2009 Sep 11 10:35 AM