Foot Locker: a perfect fit for my portfolio

Who’s buying shares of Foot Locker these days?

Anybody?

Well, if you are – with the share price down more than 50% in the last year – you’re in the minority. The good news, though, is you’re not alone. I bought a couple shares the other day (2 for $29.96/share) and, if the stock stays stuck in its current $29-$31 range, I’ll probably nibble a little more as the month goes on.

You see, Foot Locker is exactly the type of stock I like to buy … at least at current prices.

Here’s why:

It lowered my cost-basis

Couple the two shares I picked up in the last couple days with the one I already had and I have a cost-basis of $45.56 for my three-share position. Considering what a share is trading for these days, that’s obviously not too great. Considering my cost-basis was more than $70 prior to the purchase, though, I’ll take that cost-basis any day of the week.

I don’t always buy stocks in order to lower my cost basis on a particular position, but I always feel good about it when I do.

The yield is in my sweet spot

When I opened a position in Foot Locker back in May, I didn’t buy it for its then-1% yield, that’s for sure. I bought it because it had been boosting its dividend for six straight years by 11.32% a year. That’s growth I think any of us can appreciate.

Now, though, that yield has ballooned to nearly 4%. That’s pretty insane. I guess if you’re looking for a silver lining in the whole stock-price pummeling, that’s got to be it. Foot Locker is no longer just a solid growth pick (in terms of its dividend) … it’s a solid income pick as well. That’s not always an easy combination to find.

Foot Locker’s payout ratio is super low

Despite the company’s yield being close to 4%, the dividend payout ratio is just 28%. You know what that means, right? Exactly … the 11.32% dividend growth we’ve seen over the last six years is in good position to continue even though the yield is already pretty damn appetizing if you ask me.

Foot Locker is a great value stock

Let me throw a few key numbers your way:

  1. Foot Locker’s P/E ratio is at 6.83, meaning it’s undervalued by the market
  2. The company’s Price/Book ratio is 1.41, which means it’s undervalued when compared to its assets.
  3. Its Debt/Capital ratio is 4.17%, meaning it has very little debt to deal with

Those are three good signs.

Now, in all fairness, Foot Locker does have some problems, most notably its 58% dip in earnings per share last quarter verses the same quarter from 2016. That’s significant and, coupled with general retail woes and Amazon jitters, is the reason the stock has tumbled so significantly in the last six months or so.

The good news, though, is Foot Locker is in a great position, for all the reasons I mentioned above, to allocate some money to its online presence and get things rolling again. If people want to buy shoes online, I’m confident the company can make that happen.

Anyway, that’s enough about Foot Locker. I’ve also received a handful of dividends in the last week or so and have been terrible about posting. I’ll get back in the groove, but, in the meantime, let me catch you up.

Recent Dividends

Toronto-Dominion Bank: TD paid me a combined $2.33 for the five shares I own last Thursday.

CVS Health: CVS passed along a combined $2.50 for the five shares I own last Friday.

PNC Bank: PNC tossed a $0.75 dividend may way on Sunday.

Universal Corporation: UVV paid me a $0.54 dividend for the one share I own on Monday.

Coupled with the single-day record $12.41 I earned on the first day of the month, I’m up to $18.53 so far in November. I’ve already been paid by 10 companies and we’re not even 10 days into the month.

March on!

  • Steve Killingsworth

    Swish!..i’ll be looking into FL..I’ll let you know if I decide to buy or not to buy..

    • Steady Saver

      Please do. I’ll be curious to see what you think. Most people wouldn’t touch it with a 10-foot poll.

      • Steve Killingsworth

        IMO, with you plan, a few shares with a 4% divy why not? If things go sideways, its only a fraction of your portfolio.

        • Steady Saver

          I agree. One of the reasons I enjoy making smaller purchases, aside from the fact it’s all I can afford, is the risk isn’t nearly as great. I can take a few more chances.

%d bloggers like this: