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A ten-minute look at AEO



August 21, 2013 – Comments (0) | RELATED TICKERS: AEO

Based on the prior 4 fiscal years of data, AEO is starting to look pretty cheap, again.

Operating Cash Flow has averaged $370MM per year, Free Cash Flow (operating cash flow - capex) has averaged $264MM per year, and the dividend payout has averaged $189MM per year.  That's good for an average dividend yield of 6.6%, based on today's close.

The company has also $83MM in share repurchases per year, reducing the diluted share count from 209MM down to 196MM over the past 4 years.  If you include share repurchases with the dividend yield, the average total yield to shareholders is about 10%.  Roughly 100% of Free Cash Flow is paid back to shareholders through buybacks and dividends.  What a novel concept!

Bonus: The company has zero debt and $400MM in cash. 

One drawback (in my mind): the company plans to spend about $250MM in cap ex this year, meaning FCF will come in a bit lower than the 4 year average.  It's just one year of capital spending, and cap ex will likely return to normal levels in the future, but regardless, $250MM is double the amount that they typically spend in a given year in cap ex.  I hope it ends up being money well spent.

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