The Kroger Co. is the United States’ largest supermarket and has 2,742 locations in 35 states.
Their store brands include: Kroger, FredMeyer, King Soopers, Harris Teeter, and more.
http://ir.kroger.com/home/default.aspx
Some metrics I look for –
Safety:
Dividend Safety Score – 71 – out of 99 – considered “safe”
Current Ratio (look for a number higher than 1, higher the better) – 0.8
Debt to Equity (lower the better) – 1.53
Payout Ratio – 36.10%
Estimated Earnings Growth Rate – 5 year – 6.58%
Dividend history:
Years of dividend increases: 15
Dividend growth rate – 5 year – 11.63%
Current yield: 1.92%
Current dividend: $0.84
Valuation:
DCF model: $45.38
P/E Mean Reversion: $48.48
Dividend Yield Theory: $42.86
Average of the three valuations – $45.57
Current price: $44.60 (12/10/21)
Potential discount – 2%
Commentary:
Kroger (and their brands) are everywhere and are in an industry that is always in demand. You have to eat, right? In addition to being the largest supermarket in the U.S., they are only 2nd to Wal-Mart in mass retailing. The grocery business is competitive and margins are low but their size helps secure better pricing and brand recognition. The dividend payout ratio is very small so I expect them to be able to continue paying and growing their dividend for years and years to come. Given the somewhat low yield, this is a good choice for an investor with a long time frame as it will take time for the dividend to grow. They are well positioned to be a leader in the space and are at a fair valuation today.