Nike’s decent yield won’t mean much if the stock continues to lose value.
Sneaker manufacturing giant Nike (NKE -0.37%) is a consistently profitable company with a track record of dividend hikes. Does this mean you should put on your running shoes and rush out to buy Nike stock, though?
It is possible to generate $1,000 in dividend income from Nike stock if your account is big enough. After taking note of Nike’s less-than-stellar recent financial performance, however, you may end up seeking income opportunities elsewhere.
Lacing up for $1,000 in dividend payouts
For what it’s worth, Nike’s annualized forward dividend yield of 1.75% beats the consumer cyclical sector’s average yield of around 1%. Moreover, Nike has raised its quarterly dividend distributions by $0.03 per share each year since 2019.
You may be too late to buy Nike stock in time for the Sept. 3 ex-dividend date, but that should be fine if Nike continues its once-a-year $0.03-per-share dividend-raising pattern. In that case, the company’s next four distributions would be $0.40 per share per quarter, or $1.60 per share annualized.
Hence, assuming payouts of $1.60 per share, you’d need to purchase 625 shares to get $1,000 in dividend distributions over the next year. If the Nike stock price is around $83, then you’d have to invest 625 x $83 or $53,125 and wait a year to receive $1,000 in cash payments.
A digital sales downturn
Nike’s sector-beating yield is nice, but it’s really just a consolation prize in light of the company’s share price decline. Over the past year, Nike stock has lost value and underperformed the S&P 500.
Notably, Nike’s revenue was flat year over year in fiscal 2024, ended May 31, and the company’s fourth-quarter revenue declined 2%. Nike’s Q4 online sales took a hit, with Nike Direct revenue declining 8% to $5.1 billion owing primarily to a 10% fall-off in Nike Brand Digital revenue.
So, it’s wise to wait and see if Nike can improve its digital sales trends. Otherwise, the potential $1,000 in dividends won’t likely be worth the risk.
David Moadel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.