Limited Brands, Inc. (LTD): The Secret That Everyone Knows About

Current Share Price

Limited Brands is currently trading at $43.90. With earnings per share of $2.33, they are trading at a multiple of 18.8. This is cheap compared to the industry average of 19.58. They are currently trading 16.4% below their 52 week high of $52.50, reached in December of last year. With a beta of 1.5, Limited Brands is more volatile than the S&P 500.

The Dividend

Limited Brands currently pays out $1.20 annually and has a strong record of consistently raising its dividend. In fact, an increase of $0.05 quarterly was announced just two weeks ago. This $1.20 dividend means the stock yields roughly 2.7%. This is a very high yield compared to other companies in the space. Also, Limited has a great reputation for paying out special dividends. They paid out a special $1 dividend in 2010 and 2011, a $2 dividend in 2011, and a $1.25 and $3 dividend in 2012.

It is safe to say they will continue paying out quarterly dividends and that they will be raising dividends each year. A special dividend will likely continue as well, but I do not think it will be as large as the $3 it paid out this past December. This was paid out before 2013 as a last push to save investors on the tax hikes that were coming.

2013 and 2014

Limited Brands sees strong earnings growth over the next two years. In 2013, they expect to bring in $3.27 per share. This is an increase of 13.5% from 2012 and 25.8% from 2011. In 2014, Limited is expected to make an impressive $3.71 per share. This is an increase of 13.5% from 2013 and 28.8% from 2012. 2014 numbers are very similar in growth to 2013. This is a positive, showing that Limited Brands is a very consistent grower. The chart below expresses their growth from 2010 to the projections in 2014.

Bottom Line

Limited is growing because of their strong brands and the recovering economy. Even with high expectations in 2013 and 2014, I think they can beat these numbers and raise guidance. This would cause an immediate boost and send the stock back into the $50’s where it belongs. This stock is much too cheap at current levels and is a great value for any investor. I am initiating an outperform call on CAPS. Limited Brands is a STRONG BUY.

The article The Secret That Everyone Knows About originally appeared on Fool.com and is written by Joseph Solitro.

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