My Top Pick this year for growth-oriented investors is Nike Inc. (NKE). After a series of missteps tied to the shift to a direct-to-consumer business model from wholesale, Nike's top- and bottom-line growth struggled. But investors can get one of the premier global retail brands at a great valuation, writes Prakash Kolli, editor of Dividend Power.

Intense competition from Hoka and On has emerged. Plus, the Chinese economy is struggling, affecting Nike’s sales in that major end market. Consequently, the share price plummeted approximately 30% in 2024.

Nike Inc. (NKE)
A graph of a graph  Description automatically generated

But Nike is the global leader in developing, marketing, and selling athletic footwear and apparel. It also sells sports equipment, accessories, and services. Major brands include Nike, Air Jordan, Converse, Chuck Taylor, All-Star, and others. It has about 18% of the global market share and is one of the top retail brands.

Total revenue was around $51,362 million in fiscal year 2024 and about $50,012 million in the last twelve months. Consensus estimates expect lower revenue and earnings per share in fiscal 2025. However, estimates may be low if the firm fixes its near-term problems.

A longtime veteran is taking over as the CEO, and the firm should return to the basics and focus on the wholesale model. Next, the Chinese economy may recover because of stimulus. In the meantime, Nike generates excellent free cash flow, allowing it to spend on marketing, sponsorships, and innovation.

Plus, the corporation rewards shareholders through stock buybacks and growing dividends. Nike has a 23-year streak of increases, making it a Dividend Contender. I see no reason why it will not become a Dividend Aristocrat.

The trailing 5- and 10-year growth rates have been in the double-digits, and the conservative payout ratio of approximately 43% suggests more increases to come. The dividend yield is acceptable at around 2%, near a decade high.

Nike is also trading at an earnings multiple of 28.4X, which seems high, but is actually at the lower end of the five-year and 10-year ranges. Thus, it is inexpensive on a relative basis. I view it as a long-term buy.

Subscribe to Dividend Power here…