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In an effort to enhance shareholders’ return, The Kroger Co. KR, one of the largest grocery retailers, recently increased its quarterly dividend by about 14% to 12 cents a share (or 48 cents annually) from the prior payout of 10.5 cents (or 42 cents annually). The increased dividend will be paid on Sep 1 to stockholders on record as of Aug 15, 2016. Following, the news the company’s shares inched up 1.3% on Jun 23, 2016.
The dividend yield, based on the new payout and the last closing market price, is approximately 1.4%.
Kroger is actively managing its capital, returning much of its free cash to investors via share buybacks and dividends. This apart, the company has been deploying cash flows in opening stores and foraying into new markets. Kroger last hiked its quarterly dividend by 13.5% in Jun 2015.
The company also replaced its prior authorization with a new $500 million buyback program. Since, Jan 2000, the company has repurchased shares worth $12.9 billion.
Kroger is an attractive option for both growth and income seeking investors. An income generating and dividend paying stock is always a preferred investment option. People looking for regular income from stocks are most likely to be inclined toward companies that have a track record of consistent and incremental dividend payments.
A dominant position among the nation’s largest grocery retailers enables Kroger to sustain both top-line and bottom-line growth, expand its store base, and boost its market share by introducing new items, digital coupons, and order online, pick up in store initiative.
The Zacks Rank #3 (Hold) company’s strong corporate and national brands helped it gain customers loyalty. We believe that Kroger’s strong identical supermarket sales growth (excluding fuel) for about 50 successive quarters and better-than-expected bottom-line performance for ten consecutive quarters, should help it achieve its long-term earnings per share growth rate target of 8% to 11%. We expect the company to sustain its earnings growth momentum buoyed by Customer 1st strategy, effective cost management and share repurchase activities.
Key Stock Picks
Some better-ranked stocks worth considering in the retail sector include Wal-Mart Stores Inc. WMT, The Children’s Place, Inc. PLCE and Destination XL Group, Inc. DXLG. All these stocks hold a Zacks Rank #2 (Buy).
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CHILDRENS PLACE (PLCE): Free Stock Analysis Report
DESTINATION XL (DXLG): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
KROGER CO (KR): Free Stock Analysis Report
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