Guess: Dividend Yield Hard To Resist

Solid balance sheet
Recently, Guess (NYSE: GES) showed up in my stock screener as a top value stock. A 7.1% dividend yield is hard to ignore. I was curious about Guess, considering I have worked in the apparel industry before. I decided to research the underlying fundamentals of the business and its business strategy.
Guess's balance sheet looks very solid. The balance sheet is clean with hardly much debt and plenty of cash. The current ratio is high and EPS has been positive in the last 8 years, although not growing. Price is at parity with book value and the trailing PE is 16.
The dividends look safe for now. Current cash balance is at $350M and debt-to-equity ratio is at 2%. Current capex and dividend payout run rate are roughly at $40M per quarter. The dividends can be paid by raising additional debt and thus seem safe for another 2-3 years. Of course, any change in capital expenditures or significant decline in business fundamentals will impact the payout.
Earnings look weak
So, the important question is - will Guess increase its earnings? EPS has declined by 65% between FY'12 ($2.8) and FY'16 ($0.96).

GES Normalized Diluted EPS (Annual) data by YCharts
Revenues have declined by 18% during the same period (from $2.68B in FY'12 to $2.20B in FY'16). As we know, the Americas segment is the main driver of this decline most recently. The international business, which accounts for roughly 60% of Guess's revenues, is performing... Read more

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