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

NEW YORK (TheStreet) -- What a wonderful day for investors who own shares of Deckers Outdoors (DECK). Shares rocketed 8.6% higher on Monday to close at $33.59. It was a great day to own stocks, gold, energy and just about everything.

Another upside performer was a company whose shoes I wear almost every day. Nike ( NKE) rallied over 4% to close at $96.32. Oh happy day!

Even though I don't own shares of NKE, I'm happy for the Nike shareholders who will experience the benefits of an important announcement the company made on Nov. 15: The Board of Directors approved a two-for-one split of both NIKE Class A and Class B Common shares.

The stock split will be in the form of a 100% stock dividend payable on Dec. 24 to shareholders of record at the close of business Dec. 10. That means it's not too late for you and me to participate, even though it's 10 days before NKE announces its results from its last quarter on Dec. 20.

Upon completion of the split, the outstanding shares of NIKE Class A and Class B common stock will increase to approximately 178 million and 720 million, respectively. The company expects its common stock to begin trading at the split-adjusted price on Dec. 26.
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There's more good news for NKE shareholders: The Board of Directors also declared a quarterly cash dividend on the company's outstanding Class A and Class B Common Stock of 21 cents per share, on a post-split basis, payable on Dec. 26 to shareholders of record at the close of business on Dec. 10.

The dividend represents a 17% increase over the previous split-adjusted quarterly rate of 18 cents per share. This is the eleventh year in a row Nike has increased its annual dividend, over which time the dividend has increased by a factor of almost seven.

"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).

That being said, DECK has a good line of products that includes luxury footwear, handbags, apparel, and cold weather accessories under the UGG brand name. It offers open and closed-toe outdoor lifestyle footwear, multi-sport shoes, light hiking shoes, amphibious footwear, and rugged outdoor travel shoes under the Teva brand name.

It also has an action sport footwear under the Sanuk brand name, high-end casual footwear for men and women under the TSUBO brand name, outdoor performance and lifestyle footwear under the Ahnu brand name and work footwear under the MOZO brand name.

The company's leadership hasn't been able to deliver the important bottom-line numbers. That's why the EPS for last quarter plummeted 31% on almost 10% less revenue. Yet, the stock is trading at less than a 9 forward PE. Monday's almost 9% jump in the price per share on higher than average volume tells me, if you'll excuse the pun, that something is "under foot."

My hope is NKE steps up to the plate and takes this company over. It appears to be a win-win for everyone involved, and just the suggestion may help elevate the price of both companies.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

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