If you’ve been following the financial press this week, you’ll have noticed a solid rise from one of the FTSE 100 regulars. JD Sports Fashion (LSE: JD) stock jumped 9% on Tuesday in response to an impressive earnings announcement. The sportswear company is absolutely on fire at the moment, and I believe its performance will continue well into the future. Here’s why I think it’s one of the best dividend stocks for me to buy now.
Making the best of a bad situation
It’s no surprise that the pandemic simultaneously decimated some sectors of the economy and rewarded others. JD Sports, belonging to the retail sector, could and perhaps should have suffered a similar fate to its high-street counterparts, most of whom were decimated by lockdown-enforced store closures. But the company was well placed to deal with such a setback; consumers used their accumulated disposable income to purchase stylish, comfortable loungewear when confined to their homes. Coupled with JD’s efficient website system for its brand and subsidiaries (recall Primark’s complete lack of one), it managed to supply the vast demand for dressed-down styles. It comes as no surprise, then, to see JD’s pre-tax profits soar from £61.9 million in 2020, to £439.5 million in the first six months of 2021.
Crossing the pond
One area where I see exceptional long-term growth potential for JD, even despite current all-time share price highs, is its 2018 expansion into America. This has worked a treat so far; it has acquired Shoe Palace and DTLR, and has also taken full advantage of consumer stimulus checks, or ‘stimmies’, as they are more commonly known. This jump across the Atlantic is still in its nascent stages, and I believe the recent UK-USA TikTok rivalry among young people has exposed many Americans to British fashion and culture. The chunky trainers and puffer jackets that are famous among British rappers, models, and teenagers, have been embraced widely by Americans, and JD is one of the best supplier of these styles. That’s another reason why I believe it’s one of the best shares to buy now for my own portfolio.
A bumper dividend ahead?
After its well received news on Tuesday, JD preferred not to announce an interim dividend. But with expected end-year profits hoped to top £750 million, it is rumoured that its final dividend will be larger, if not the largest, in recent history. Its share price has risen 38% and as I write, is trading at 1,147p – near-enough a record-high. As a result, JD is a relatively expensive buy in the FTSE 100, holding a strong price-to-earnings ratio of 35. This won’t deter me, though, as I believe there is further growth to be had, especially to a growing American audience.
For these reasons I see JD as one of the best dividend stocks to buy and hold for my portfolio in the long term.
Joseph Wilkins has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.