Company Description: Weyco Group, Inc. distributes, wholesale & retail, men's branded footwear in the U.S., Canada, Europe; it offers casual footwear, dress shoes and accessories under Florsheim, other brands.
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
WEYS is trading at a discount to only 1.) above. The stock is trading at a slight discount to its calculated fair value of $24.87. WEYS earned a Star in this section since it is trading at a fair value.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
WEYS earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. WEYS earned a Star for having an acceptable score in at least two of the four Key Metrics measured. Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2000-2003, 2001-2004, 2002-2005, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1935 and has increased its dividend payments for 29 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:
1. NPV MMA Diff.
2. Years to > MMA
WEYS earned a Star in this section for its NPV MMA Diff. of the $4,274. This amount is in excess of the $600 target I look for in a stock that has increased dividends as long as WEYS has. If WEYS grows its dividend at 15.0% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. WEYS earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.
Memberships and Peers: WEYS is and a Dividend Champion. The company's peer group includes: Brown Shoe Co. Inc. (BWS) with a 1.9% yield, Phillips-Van Heusen Corp. (PVH) with a 0.3% yield and Core-Mark Holding Company, Inc. (CORE) with a 0.0% yield.
Conclusion: WEYS earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks WEYS as a 5 Star-Strong Buy.
Using my D4L-PreScreen.xls model, I determined the share price would need to increase to $48.72 before WEYS' NPV MMA Differential decreased to the $600 minimum that I look for in a stock with 29 years of consecutive dividend increases. At that price the stock would yield 1.27%.
Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $600 NPV MMA Differential, the calculated rate is 8.7%. This dividend growth rate is below the 15.0% used in this analysis, thus providing a significant margin of safety. WEYS has a risk rating of 1.00 which classifies it as a medium risk stock.
WEYS principal brands of shoes are well respected and include include Florsheim, Nunn Bush, Brass Boot, Stacy Adams, and Weyenberg. The company held up well during the economic downturn. In the face of declining earnings, management was able to increase cash flow and keep the string of consecutive dividend increases in tact. With virtually no debt and a low free cash flow payout, the company is well-positioned to continue increasing its dividend in the future. WEYS is currently trading below my calculated fair value of $24.87. Unfortunately, WEYS is in the Consumer Goods sector in which there are other worthy and higher yielding options available. For additional information, including the stock’s dividend history, please refer to its data page.
Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.
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