Entering text into the input field will update the search result below

Gap Inc.'s Dividend Likely To Freeze

Jul. 04, 2017 8:02 AM ETThe Gap, Inc. (GPS)FL4 Comments
Mike Bruce profile picture
Mike Bruce


  • I believe there is a strong possibility Gap will freeze its dividend in October.
  • The answer lies in the company's quarterly guidance.
  • Is there a better option on the CCC list?

Gap Inc. (NYSE:GPS) has been a mainstay on the fashion scene for as long as I can remember. Founded in 1969, the company's products are available in 90 different countries in around 3,700 stores, according to its website. Operating through its best known brands of Gap, Banana Republic and Old Navy, along with others, the company is a mainstay in shopping centers and malls. It has been paying a dividend for the past 29 years, increasing yearly for the past 12 years, and currently sports a yield over 4%. However, I feel there is a high chance the dividend is frozen when the company's planned October dividend is announced. I will explore my reasoning going forward and look to see if there is currently better value on the CCC list.

"High dividend payers that have been progressively increasing their dividends, that’s what retail investors will want."

- Dennis Gartman

I bought into Gap Inc. for the first time in September 2016 as the result of a called covered put. Since then, I have written numerous options on the stock, had it sold away from me once through a covered call, and then got it back again in December, 2016 through another option. Most notably I wrote a covered call in May 2017, effectively lowering my personal cost basis to $21.34. Rated in the high 80s by my stock screener, at the time that I bought the stock, I believed I was trading risk for security. GPS had a current ratio over 1.5, almost twice as much working capital to long-term debt, yielding 3.5% with a payout ratio of around 50%. Add to this the fact I pulled the name off the Contender tab of the CCC list, meaning the company had continued to increase through the Great Recession, I thought I was golden. Then the Jan 2017 CCC list popped. The list is a living breathing document and changes slightly over time. Scrolling

This article was written by

Mike Bruce profile picture
A self educating student always striving to learn new things.

Analyst’s Disclosure: I am/we are short GPS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.