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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Hey Nike, Why Don't You Just Buy Deckers Outdoors?

Stocks in this article: NKE DECK

"Nike has a consistent track record of delivering value to our shareholders," said its CEO, Mark Parker.

"Over the last 11 years the company has returned over $14 billion to shareholders through dividend payments and share repurchases. Today's increase, together with the four-year, $8 billion share repurchase program announced in September, reflects our commitment to delivering value for our shareholders and the ongoing confidence we have in our strategy to generate long-term profitable growth and strong cash flows. I've never been more confident and excited about our future growth opportunities."

Okay Nike, you have my attention and the attention of a number of potential investors. NKE is a company that rewards shareholders patience and pays them to own the stock, irrespective of all the fear-mongering about the so-called "fiscal cliff."

After the dividend increase to 21 cents over the previous split-adjusted quarterly rate of 18 cents per share, the dividend yield, based on the Monday closing price of $96.32, will increase to a percentage technically higher than the yield on the 10-year U.S. Treasury Bond...1.75%.

Here's a lovely chart showing Nike's stock price over the last year in relationship to its trailing 12-month earnings per share. NKE Chart NKE data by YCharts

Not exactly a pretty picture unless the year-over-year EPS growth is about to pick up significantly. That may or may not happen, but I have an idea that could be accretive to earnings and may accelerate the upward price momentum of NKE shares.

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Drum roll please, and the band plays "dah-dah"! My brilliant idea is for NKE to quickly and stealthily offer to buy Decker Outdoors while it's still a relatively inexpensive stock. Since NKE will be increasing its float with the stock split it can offer a part cash, part stock deal to DECK shareholders.

Let's pause to look at a chart similar to the one I amused you with above. DECK Chart DECK data by YCharts

Also a very gut-wrenching picture, especially for beleaguered DECK shareholders, and the solutions to the nose-diving EPS are not readily apparent. In the most recent quarter ending Sept. 30 DECK had an operating margin of 16%, a price-to-earnings-to-growth ratio (PEG ratio) of only 1.19, and too much debt ($275 million).

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