Last month, I wrote an article critical of Abercrombie & Fitch (ANF) stock. I said, in part:
“Theoretically, the premise ought to be pretty simple: Abercrombie yields 5%, the historical performance of the S&P 500 is 10%, so all you need is the maintenance of the dividend and 5.1% earnings per share growth to beat the market.
But I am unpersuaded. The current $0.80 annual dividend payout takes up all of the earnings, and perhaps even more so, and this is fertile soil for a ripe dividend cut. And secondly, there is no five-year comparison period in the past ten years in which Abercrombie shareholders can point to growing earnings. This means that you can’t even rely upon the current $0.70 to $0.90 base to serve as a low point. Things could get worse.
And even right now, the P/E ratio of 19x earnings isn’t that attractive of an … Read the rest of this article!