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Burberry Group plc Could Help You Retire Early


Despite its reliance on emerging markets for sales growth, Burberry (LSE: BRBY) (NASDAQOTH: BURBY.US) has held up pretty well in recent weeks.

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Indeed, while many other companies with significant exposure to emerging markets have been hit hard, Burberry has performed almost exactly in-line with the FTSE 100. Shares are down 2.8% year to date, while the FTSE 100 is down 2.6% year to date.

The reason for this could be that Burberry is not particularly expensive — when compared to its sector, that is.

For instance, Burberry currently trades on a forward price-to-earnings (P/E) ratio of 17, while the sector to which it belongs, Personal Goods, trades on a P/E of 23.

This puts Burberry on a 26% discount to its sector, which seems unjustified when the quality of the company is taken into account. This discount could be a key reason why Burberry has not fallen heavily in 2014, as the sustainability of the emerging market growth story is brought into question. In other words, Burberry may have been very cheap before the start of 2014 and is now reasonably priced.

Indeed, Burberry continues to deliver strong earnings per share (EPS) growth and is forecast to post double-digit gains in EPS in the year to March 2015.

However, an aspect of Burberry that may be somewhat surprising to investors is the income that it offers, but more importantly, the rate of increase of dividend growth that is set to take place over the next two years.

Certainly, income remains a key criteria for Foolish investors to focus upon — especially when interest rates appear unlikely to move upwards before the general election in 2015. So, the fact that Burberry is forecast to increase the amount it pays in dividends per share by 22.5% over the next two years could make it an attractive stock for a new type of clientele: the income-seekers.

Of course, Burberry’s yield is not yet hugely attractive — it currently stands at 2.2%. However, if shares stay where they are then it could be as high as 2.7% in 2015, which is pretty impressive for a company that also offers above-average growth rates.

Therefore, as a result of a combination of a fair price, growing yield and above-average earnings forecasts, Burberry could help you retire early.

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> Peter does not own shares in Burberry. The Motley Fool has recommended shares in Burberry.

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