Family Dollar Stores, Inc. (FDO) operates a chain of self-service retail discount stores primarily for low and middle income consumers in the United States. This dividend aristocrat has paid uninterrupted dividends on its common stock since for 36 years in a row.
The company’s last dividend increase was in January 2012 when the Board of Directors approved a 16.70% increase to 21 cents/share. Family Dollar‘s largest competitors include Target (TGT), Dollar Tree (DLTR) and Big Lots (BIG).
Over the past decade this dividend growth stock has delivered an annualized total return of 8.20% to its shareholders.
The company has managed to deliver 10.70% in annual EPS growth since 2002. Analysts expect Family Dollar to earn $3.66 per share in 2012 and $4.23 per share in 2013. In comparison Family Dollar earned $3.12/share in 2011.
The company will be able to grow through new store openings as well as same-store sales growth. The company has expanded the number of stores by 3% per year since 2005. The company is targeting 5-7% store growth in 2012. It has been able to increase its assortment of foods, including refrigerated ones, and qualify for inclusion in the food stamp program. Family Dollar’s limited time offerings creates excitement for consumers, and differentiates the chain from its competitors. In addition, it is increasingly accepting credit cards in its stores, which creates convenience for its customers.
The company has been able to increase return on equity from 20% in 2002 to over 30% in 2011. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 11.60% per year over the past decade, which is higher than to the growth in EPS.
A 12% growth in distributions translates into the dividend payment doubling every six years. If we look at historical data, going as far back as 1988 we see that Family Dollar has managed to double its dividend every six years on average.
Over the past decade, the dividend payout ratio has remained steady between 20% and 30%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently, Family Dollar is overvalued at 21.50 times earnings and yielding 1.20%. I would keep a close eye on the stock however, and would consider adding to my position on dips below $40/share.
Full Disclosure: Long FDO
- Avoid Cyclical Dividend Growth Stocks
- My Dividend Retirement Plan
- Dividend Aristocrats List for 2012
- Dividend Growth Stocks by Sector - Retail
One way to monitor dividend growth investments is by checking the weekly list of dividend increases. I also find helpful to monitor the an...
As I explained in my article on my dividend retirement plan , I invest in blue chip dividend stocks which can afford increase dividends for...
This is a guest post from Tawcan, who writes about dividend investing and financial independence on his blog at tawcan.com When it comes t...
While I am a buy and hold passive investor, I also try to regularly monitor the companies I own . I usually review the investments I have ma...
Successful investing is simple. You live within your means, save money regularly and invest it. You buy a collection of quality businesses a...
The daily life of dividend growth investor Successful investors buy stock in companies which are within their circle of competence. This c...
This is a guest post written by Todd Wenning, CFA, who is an equity research analyst. Todd is the author of Keeping Your Dividend Edge: Str...
PepsiCo, Inc. (NYSE:PEP) manufactures, markets, and sells various foods, snacks, and carbonated and non-carbonated beverages worldwide. The ...
Johnson & Johnson (NYSE:JNJ), together with its subsidiaries, is engaged in the research and development, manufacture, and sale of vario...
Diageo plc (DEO) produces, distills, brews, bottles, packages, and distributes spirits, beer, wine, and ready to drink beverages. This inter...