This Dividend Stock Just Doesn't Quit
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In the few short years that I’ve been investing, none of my holdings have moved with the ferocity that Williams-Sonoma (WSM) has.
As I write this today, Williams-Sonoma’s share price is in the midst of a 17% surge following the release of their latest quarterly earnings report, where they surpassed expectations on both the top and bottom line. This surge marks just one chapter in what has been an impressive year for the stock, with its price soaring over 145% in the last twelve months alone, and possibly more by the time you’re reading this.
Source: Seeking Alpha | WSM share price return vs the S&P 500 (1Y)
But what exactly is driving this success story? Let's delve into the company a bit more.
Founded in 1956 by Chuck Williams, the company began as a humble store in Sonoma, California, specializing in French cookware. Williams' dedication to quality and customer service set a high standard that propelled the business to become the world's largest digital-first, design-led, and sustainable home retailer.
Chuck Williams, founder of Williams-Sonoma
While Williams-Sonoma is most known for its high-quality kitchen products, what many people don’t realize is that the company also owns several other popular home furnishing brands like Pottery Barn, West Elm, and Rejuvenation.
In an industry as fragmented as home furnishing, the company’s brands are some of the most recognizable, which is one of their competitive advantages, and their diverse portfolio helps them cater to customers across various budgets and tastes, bolstering their sales and market presence.
Source: Williams-Sonoma Investor Presentation
In addition to brand recognition, some other strengths that set Williams-Sonoma apart are the company’s in-house design capabilities and their unmatched digital presence, with 66% of the company’s sales coming from e-commerce channels.
Source: Williams-Sonoma Investor Presentation
Moreover, the company's financials speak volumes about its success. I cover them in more detail here, but here are some of the quick stats:
Their revenue has grown by 7.52% every year for the past five years.
Their earnings per share (EPS) has grown by 34.40% every year for the past five years.
Their free cash flow has grown by 30.58% every year for the past five years.
They have no debt on their balance sheet. It's hard to go bankrupt when you're debt-free.
They’ve been buying back shares very aggressively with 98.8M shares outstanding in 2014, compared to 65.7 million shares outstanding today.
Overall, as an increasing amount of money enters the business, an increasing amount is being kept by the business after all expenses, taxes, and other financial obligations are accounted for. This is exactly what you want to see.
On top of that, they've increased their dividend by a whopping 16% on average every year for the past five years, and just announced another generous increase—at 26%—which has us shareholders jumping for joy.
Speaking personally, Williams-Sonoma has been my best investment by a long shot, and is the first stock in my portfolio to double in value. That’s pretty incredible in its own right, but the sheer speed at which this has happened is mind-blowing to me.
As a result, Williams-Sonoma is now the third largest position in my portfolio, and is quickly gaining ground on my two largest positions, Realty Income (O) and Johnson and Johnson (JNJ).
Source: getquin | My top 3 largest holdings
Although it's starting to get tempting to cash-in on these gains, I believe in letting your runners run, especially if the underlying company is still firing on all cylinders. So far, Williams-Sonoma has been the gift that keeps on giving, so I'm just going to let it do its thing, and am keeping my fingers crossed for continued success.
With that said, I want to hear from you: What’s your best performing stock of all-time? Write to me here and let me know.
And a big thank you to all of the readers who responded to last week's newsletter! You can read some of the responses down below in the "Hot Takes" section. 👇
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IN MY PORTFOLIO 📈
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ICYMI 🎥
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SINCE YOU ASKED 💬
"How do you determine your position size for each stock? I'm researching before I invest and I'm having trouble deciding how much of my portfolio to put into each stock."
- Caleb | Email Submission
Honestly, I don't have a strict method for managing this. The most I do is set a maximum size for each stock, like not letting any one position make up more than 10% of the portfolio in terms of dollars invested or dividend income generated.
There are exceptions to this, but I'll typically buy a stock until it's not at a great value anymore or until it gets close to the limits I mentioned above. I figure that over time, my investments will naturally balance out and diversify.
Have a question? Ask me here to see it featured in an upcoming newsletter.
HOT TAKES 🔥
Last week, I asked readers what draws them to dividend investing. Here are some of the responses:
Pat said: I invest in dividend stocks because usually they are solid companies I don't have to worry about going under unexpectedly, I always have some sort of money coming to me no matter what the market is doing, and since I re-invest dividends, it is a set-it-and-forget-it way of dollar cost averaging.
Dan said: My favorite thing about dividend investing is the fact that I don't have to sell my shares to get the income.
Trevor said: I'm pretty new to investing (4 months in), and I've found that most of the companies I'm familiar with pay dividends. I wasn't looking for dividends specifically at first, I just fell into it because of that. But I'm loving those paychecks so far, and am excited to keep growing this thing!
LAST WORD 👋
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