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On Tuesday, luxury-clothing retailer Ralph Lauren (NYSE:RL) reported earnings for the fourth quarter of its 2012 fiscal year. The company earned $0.99 per share, up 34% from the fourth quarter of fiscal 2011, while sales advanced 14% compared to the same period last year. The firm's outlook for fiscal 2013 was rather underwhelming, with revenue expected to grow in the mid-single-digits due primarily to weakness in Europe. Still, we think the firm's shares are worth just north of $150 each (click here for our fair value estimates), roughly in line with where it is currently trading.

The strength in Ralph Lauren's retail store operations was the highlight of the quarter. Aggregate same-store-sales growth was 12% thanks to a 30% jump at RalphLauren.com, 5% growth at flagship stores, 14% same-store-sales growth at Club Monaco stores, and strong expansion of 10% at outlet stores. While management noted that margins at retail stores aren't quite as high as they are for wholesale, we agree that the best way for high-end retailers to drive revenue growth is by controlling the message of their product to consumers. We've seen fantastic results at Lululemon (NASDAQ:LULU), Tiffany (NYSE:TIF), and even Nike (NYSE:NKE) by pursuing this strategy, and we wouldn't expect anything different out of Ralph Lauren.

Though the company may struggle in Europe, we suspect that growth in China and North America may be even better than what management currently anticipates. We've noticed a shift in consumption patterns of the US shopper that we think will continue to favor high-end retailers for the next several years. Plus, we think a classic, American brand like Ralph Lauren will really click with Chinese consumers.

Additionally, Ralph Lauren doubled its quarterly dividend to $0.40 per share, representing $1.60 in annual dividends (a 1.06% annual yield). While this is not high enough to warrant it as a member of our Dividend Growth portfolio, we think its dividend has significant room to grow. Prior to the recent increase, Ralph Lauren's Valuentum Dividend Cushion score was nearly 10 - meaning it was able to cover future dividend payments with cash flow nearly 10 times, after considering its capital structure and net balance sheet impact. Our Dividend Cushion has proved effective at identifying dividend cuts and suspensions, with the most recent example being JC Penney (NYSE:JCP), which we highlight here.

Though its shares are fairly valued and its annual dividend yield not yet large enough, the company's incredible brand value and operational excellence leave it poised to grow in China and emerging markets. We're keeping an eye on the firm's shares for a more attractive entry point, as Ralph Lauren's management seems dedicated to grow its dividend over time -- and if the recent increase is any indication, in a big way.

Source: Ralph Lauren Could Easily Double Its Dividend Again