Industry Analysis: Grocery Store Stocks

This week, I felt like taking a different approach to finding hidden gem dividend growth stocks.  Typically, as I did with my watch list last week, I run the Dividend Diplomats Stock Screener and try to identify  a sample of stocks that fit my metrics that I can buy at that moment in time.  And if that doesn’t work, Lanny or I will run a different screener and create a “Top 5” stock list of some sorts and identify a certain type of dividend stock we are targeting.  For example, we have run screeners for low dividend yield, high dividend growth rate stocks and dividend growth stocks with low debt to equity ratios in the past. This time, my approach was to identify an industry that is not represented in my portfolio and check out a few dividend stocks in the sector and see what I’m missing.  Maybe they will fit, maybe they won’t….but there is only one way to find out.  For today, I wanted to check out some grocery store stocks that pay a dividend.

Before I dive into the results, I wanted to dive into how I generated the population.  On the website, I entered the following metrics to generate the population:

  • Industry = Grocery Stores (obviously)
  • Market Cap = Greater than Mid-Cap (+ $2b)
  • Dividend Yield = Greater than 0%

Using this population, I told myself I would select the grocery store stocks with three highest dividend yields and check them out.  I focused on Mid-Caps and greater because I personally am not that interested in investing in small cap stocks, even if they pay a dividend.  They are still a major gamble at that point and there isn’t always as much information about the companies available in the market place. That last point isn’t always the case, but I have noticed it before. Plus, I one time tried investing in a small-cap dividend stock in my “Bert’s the smartest man in the room” moment at the beginning of my investing career and was quickly tossed off my throne and was humbled.  That left a sour taste in my mouth and thank goodness it was not for a lot of money. I selected the three highest yields in the industry because as I found out, stocks in the grocery store industry do not pay a relatively higher dividend yield.  Those are the basic rules for my simple industry screener and now it is time to evaluate the results!

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Wendell Brown 5 years ago Member's comment

Even though you're not going to buy it, your analysis of #WholeFoods is way too positive and superficial, imho. Their stock has had rough going this year. $WFM.

Dividend Diplomats 5 years ago Author's comment

As I mentioned in this article, I gave a pretty high level review using the metrics in our stock screener (Yield, Payout, Dividend Growth Rate). If the company passes that and I decide that I want to consider it further, I will take the time to do a deeper dive and probably provide the analysis you were looking for. However, based on my screener, I determined I was not interested in pursuing further so I left the analysis where it was at. However, I don't think commenting on their concept of 365 stores opening to provided a cheaper option for customers is too positive. It could work out well for them or it could not. But as a consumer, I'm excited about the idea. Hopefully that gives a little more insight as to why I conducted my analysis the way I did. Thanks for the comment!


Bruce Powers 5 years ago Member's comment