Cherokee, Inc. (NASDAQ:CHKE)

CAPS Rating: 3 out of 5

The Company markets and licenses the Cherokee, Sideout and Carole Little brands and related trademarks and it represents other brands for apparel, footwear and accessories.

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Player Avatar Loerke (78.73) Submitted: 4/21/2011 9:21:27 PM : Underperform Start Price: $17.95 CHKE Score: +32.09

This stock makes no sense. Drawn by the dividend and a simple business model that seemed impossible to fail, I used to own it in real life. A few years ago, though, I jumped ship when I noticed that the yearly dividends per share are always significantly more than the yearly earnings per sense. That's a huge red flag. I suspect that many investors are drawn to CHKE by the dividend as I was, but it is plainly unsubstainable, and as soon as the dividend gets cut again, it will disappear from investors' radar screens. It's also worrisome that they are so hugely dependent on a few contracts with retailers.

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