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Guess: Looking For Green Shoots In Q1 Earnings

Jun. 01, 2020 11:53 AM ETGuess?, Inc. (GES) Stock
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  • Consensus is looking for -$0.88 in EPS in Q1.
  • The dividend in Q1 thus far has not been paid.
  • To protect liquidity and inventory, it should not be paid.
  • This may present a strong buying opportunity.
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Many times, when a respective stock falls significantly in value, the dividend-oriented investor decides to double down on the original investment. In our opinion, this turns out to make sense many times especially if the fundamentals of the company have not changed all that much. Doubling down on dividend aristocrats fits the equation here nicely for two reasons.

Firstly, a proven dividend growth stock (25+ years of dividend increases) will invariably have a track record of elevated earnings and cash flows which support the dividend. A "shock" to the financial system or something internally based should be able to be weathered due to the financial strength and fundamentals of the aristocrat.

Secondly, aristocrats because of the way they are set up need to be very risk averse with how they manage their capital. The reason being is that they know they have a sizable expense (sometimes a rising expense if the share count is not coming down) to their shareholders every year. Because of this, cash flows need to be protected, which is why acquisitions and capex projects have to be costed comprehensively before getting the go-ahead.

Most times though the aristocrats come with lofty valuations, which means their dividend yields are not that high. On the opposite side of the spectrum, you have a company like Guess (NYSE:GES) which up to the first quarter this year paid out an annual dividend of $0.45, which equates to a present yield of 4.7% (well above average). Management stated back in March that it was postponing its decision with respect to the payment of the quarterly dividend in the first quarter. Value investors have to consider here that the dividend may not return in the foreseeable future, so they must price this into their potential investments. Shares at present are trading well under $10


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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GES over the next 72 hours. 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.

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