As an investor in your 50s, you're likely looking to grow your nest egg so that it can help support you when you retire. You're probably also interested in building a passive income stream, ideally one that will grow over time.
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Fortunately, well-chosen dividend growth stocks can help you accomplish both of these goals. And with its powerful wealth-building combination of increasing dividend payouts and strong share price appreciation,Nike is one of the best available in the market today.
Image source: Nike.
A dominant competitor
Nike has a renowned brand trusted by athletes and their millions of fans. As the world's leading provider of athletic apparel, Nike possesses tremendous scale advantages over its smaller rivals. The company spends more than $3 billion per year on "demand creation" -- basically, an all-encompassing marketing platform, including endorsements, TV, print, and digital advertising, and promotional events.
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These all help to continuously reinforce Nike's brands in the minds of consumers. In addition, Nike's large research and development program and innovative culture allow it to remain on the cutting edge of technology -- an advantage that should only grow in importance as the lines between sports apparel, wearable devices, and fitness apps begin to blur in the years ahead.
Long runways for growth
Nike's massive global-distribution platform spans across thousands of retail accounts all over the world. The company also continues to expand its direct-to-consumer business, and has grown its company-owned store count to more than 900 locations worldwide.
Yet it's Nike's e-commerce operations that may hold even greater potential: The company has only recently started to invest heavily in its Nike.com online shopping site, and it's already a $1 billion business -- one that grew 55% in fiscal 2015. Even better, with e-commerce set to capture a steadily expanding portion of overall retail sales in the coming years, Nike.com represents a multiyear -- and potentially, multidecade -- growth opportunity.
An attractive risk profile
The breadth and depth of Nike's portfolio -- which spans across multiple brands, sports categories, geographies, and retail channels -- is unmatched.This helps to reduce the risk from any particular product line, country, or sales platform.
Additionally, Nike is very strong financially. Its balance sheet carries $3 billion in net cash, which helps the company to weather economic downturns. Moreover, these recessionary periods can often serve to strengthen Nike's competitive position, as its financial strength allows it to continue to invest heavily in marketing and R&D, while many of its competitors are forced to pull back.
Wealth-creating capital returns
Perhaps most importantly, Nike is a cash-generating machine: The sporting-goods king produced more than $4.6 billion in operating cash flow and $3.7 billion in free cash flow in 2015. This gives the company a steady stream of capital to reinvest in the business, while also allowing management to reward investors with share buybacks and rising dividend payments. In fact, during the last five years, Nike has repurchased 10% of its shares outstanding,and more than doubled its dividend.
Yet with its stock price growing at an even faster rate during that time, Nike's dividend yield has remained largely between 1% and 1.5%. That's kept Nike below the radar of many income investors, much to their chagrin.
All told, Nike offers investors an excellent combination of growth, income, and relative safety -- all of which make it a stock that investors in their 50s may wish to consider.