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Summary Hanesbrands is in a strong growth uptrend, can it continue? Dividend is 1.2% and has been paid for three years with a low payout ratio. Growth over the last 5 years is fantastic at over 500%. This article is about Hanesbrands (NYSE: HBI ) and why it should be considered as a growth company. Hanesbrands products cover a full line of consumer goods and designs, manufactures, sources and sells a range of apparel products, including t-shirts, bras, panties, men’s and children’s underwear. This growth company could make you rich if the growth continues. The Good Business Portfolio Guidelines, total return, earnings, and company business will be looked at. Good Business Portfolio Guidelines. HBI passes 8 of 10 Good Business Portfolio Guidelines. These guidelines are only used to filter companies to be considered in the portfolio. There are many good business companies that don’t break many of these guidelines but will still not be considered for the portfolio at this time. For a complete set of the guidelines, please see my article “The Good Business Portfolio: All 24 Positions”. These guidelines provide me with a balanced portfolio of income, defensive and growing companies that keeps me ahead of the DOW average. Hanesbrands Inc. is a large cap company with a capitalization of $13.5 Billion compared to many other similar clothing manufacturers. The company has a dividend yield of 1.2% and is its dividend has been paid for 3 years in a row with the payout ratio low at 32%. HBI is therefore not a dividend story at this time but may be if this growth of the company continues. Hanesbrands’ cash flow is good at $503 Million, allowing it to pay its modest dividend and have plenty left over to investing in the growth of the company. HBI has bought small companies to attach to its already large apparel business. They are just getting the cost savings from the Knights purchase. I also require the CAGR going forward to be able to cover my yearly expenses. My dividends provide 2.8% of the portfolio as income and I need 2.2% more for a yearly distribution of 5%. HBI has a 3 year CAGR of 20% easily meeting my requirement. Looking back 5 years $10,000 invested 5 years ago would now be worth over $55,000 today. I feel this makes HBI a good investment for the growth investor. S&P Capital IQ does not have a star rating on HBI but the financial parameters on the fact sheet are very positive indicting a buy. Total Return and Yearly Dividend The Good Business Portfolio Guidelines are just a screen to start with and not absolute rules. When I look at a company, the total return is a key parameter to see if it fits the objective of the Good Business portfolio. HBI did better than the DOW baseline in my 30.4 month test compared to the DOW average. I chose the 30.4-month test period (starting January 1, 2013) because it includes the great year of 2013, the moderate year of 2014 and 2015 YTD. I have had comments about why I do not compare the total return to the S&P 500 average. I use the DOW average because the Good Business Portfolio has six DOW companies in it and is weighted more to the DOW average than the S&P 500. Modeling the DOW average is not an objective of the portfolio but just happened by using the ten guidelines as a filter for company selection. The total return makes HBI appropriate for the growth investor. The dividend is below average and well covered and has been increased each year for 3 years. DOW’s 30.4-month total return baseline is 38.03% Company Name 30.4 Month total return Difference from DOW baseline Yearly Dividend percentage Hanesbrands Inc. 265.7% 227.7% 1.20% Last Quarters Earnings For the last quarter HBI reported earnings that were expected at $0.22 compared to last year at $0.19 and expected at $0.22. Revenue missed by $20 Million. They guided higher to $1.61 -1.66 for the year. This was a fair report. Earnings for the next quarter are expected to be at $0.50 compared to last year at $0.39. HBI will most likely do well going forward. In the fullness of time HBI should continue its growth and make good total returns but will be watched for weakness. Business Overview The HBI apparel business is highly vulnerable to economic shocks as the purchase of clothing items is largely optional in comparison to other discretionary consumer goods. In the first quarter, the negative effects of a harsh winter, West Coast port disturbances and unfavorable currency translations were offset by an improving economy and lower gas prices which improved consumers’ discretionary spending power. The Company’s innerwear and active wear apparel brands include Hanes, Champion, Bali, Playtex, Maidenform, JMS/Just My Size, L’eggs, Flexees, barely there, Wonderbra, Gear for Sports and Lilyette. Its international brands also include DIM, Nur Die/Nur Der, and Zorba,. The economy seems to have steadied and is getting better but very slowly and who knows when the FED will start to raise rates which will indicate a stronger growing economy. The past three years have seen a straight line of upward growth for HBI , we will see in time if it can continue. Low Cotton prices have helped HBI reduce material costs. Take Aways I think HBI could well be a continuing growth company. I have just started a small position at 0.3% of the Good Business Portfolio and will add to it if the earnings continue to show growth and when cash is available as I trim the positions above 8% after earnings season. The objective of the Good Business Portfolio is to embrace all styles of investing, HBI is a growth play. My only fear is that I am too late to the party. Of course this is not a recommendation to buy or sell and you should always do your own research and talk to your financial advisor before any purchase or sale. This is how I manage my IRA retirement account and the opinions on the companies are my own. Disclosure: I am/we are long HBI. (More…) 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. Scalper1 News
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