70 Years of Dividends - Supervalu (SVU)

Grocery retailing done correctly is a very cash generative business. With a 70 year dividend track record and a current yield over 3%, Supervalu (SVU) might just be worth a look.

If there is one lesson which has come out of the global financial crisis, it is the value of companies with solid and dependable dividend track records.
 
One stock which fits the bill is US retailer and supply chain manager Supervalu (SVU) which has racked up 70 years of consecutive quarterly dividends.
 
The company, which is recognized as the leader in the US grocery retailing industry, operates nearly 2,500 retail stores and delivers supply chain services to 2,200 independent grocery businesses.
 
On the numbers front Supervalu (SVU) offers investors a handy dividend yield of 3.8% and in the "Food & Staples Retailing" offers the second best yield behind Sysco (SYY).
 
Reporting first quarter earnings in July the company showed net sales of $11.5bn and net earnings of $67m, or $0.31 per diluted share. This was in comparison to the net sales of $12.7bn and net earnings of $113m, or $0.53 per diluted share which the company delivered for the same period in the previous financial year. First quarter sales were disappointing, but margins remained steady and the company re-affirmed its fiscal year 2011 guidance.
 
Importantly for this retailer the gross profit margin in the first quarter was 22.5% percent of net sales, compared to 22.4 percent last year, indicating that the group retained some pricing power despite slower net sales.
 
First quarter net cash flows from operating activities was $337m compared to $492m in the prior years with the company completing 19 major remodels and 3 minor remodels in the quarter. In its guidance for the full year for 2011 the company indicated that capital spending is projected to be approximately $700m, which will include 60 to 75 major store remodels, 30 to 40 minor remodels, 2 replacement stores, and approximately 100 hard-discount stores.
 
The company will also be looking to reduce its total debt by around $600m.
 
Shares in Supervalu (SVU) have been out of favor with investors since March despite a strong recovery in global equity markets. The stock has slid from around $17.30 to $11.60 and may potentially provide a buying opportunity if you are seeking a defensive retailer with dividend income to add to your portfolio.
 
While the share price has fallen over the last few months, the yield and the investment in new stores may be something for investors to consider, especially if one takes into consideration the 70 year dividend track record.

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