With shares of Dick’s Sporting Goods (NYSE:DKS) trading at around $50.71 is DKS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Dick’s Sporting Goods threw out a double whammy yesterday in regards to news. CFO Tim Kullman announced his retirement. The company also announced a $2 special dividend. This is payable on December 28 to shareholders of record on December 17. It’s estimated that this will cost Dick’s Sporting Goods $254 million. They can afford it, but barely. There is only $294.49 million in cash. A lot of companies are offering special dividends prior to the Fiscal Cliff and tax hikes, but in this case, it looks like a panic move. All it will do is draw in weak longs who will sell down the road.
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Another important bit of news here is that over the past six months insiders have sold over 4 million shares over 17 transactions. Insiders sell for all kinds of reasons, especially with the holidays approaching, but that’s a lot heftier than the average, and it’s coming at a time when the CFO is retiring, which isn’t overly comforting.
The short position of 12.80% is high on this stock, so there are plenty of people who don’t feel good about the long-term potential for Dick’s Sporting Goods. All that said, let’s take a look at some numbers and see if Dick’s Sporting Goods still has legs.