Nike has been an interesting stock to watch lately. Despite market saturation and absurd competition in both the North American and European markets, the company continues to make money hand over fist thanks to innovative designers and one of the most popular brands in the world. In the next few years, an increased focus on emerging markets could be the key to sustained growth.
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Nike benefits from a premium brand image, a major factor in the company's ability to demand top dollar for its products. As a result, the company's gross margins are enviable, and its balance sheet is excellent.
Because of Nike's sheer size, it is typically the biggest single supplier for its retailer customers; that means that the company holds the majority of the pricing power in its relationships. It also means that retail outlets will continue to focus energy on selling big-ticket Nike items.
While the company's 27 cent dividend is welcomed by Wall Street, the payout is far from game-changing for Nike's shareholders. That said, continual dividend increases and billions of dollars earmarked for share buybacks do have a palpable impact on shareholder value over time.
With eyes to emerging market countries and a history of doing right by shareholders, Nike should continue to be a favorite among investors (including Warren Buffett) in 2010.
Disclosure: I own Nike
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