We're coming up on the tenth anniversary of Dollar General's (NYSE: DG) dividend. It's saying something that, over this considerable stretch of time, the payout's yield has never been as high as in recent weeks.
That's not necessarily good, as the jacked-up yield is due to a significant post-earnings stock slide. Let's look at the company and see how many shares an investor would need at these depressed share prices to collect $1,000 in annual dividend payments.
An eye-catching dividend yield
These days, Dollar General pays a quarterly dividend of $0.59 per share, which annualizes to $2.36 per share and yields 2.9%. So an investor would need to hold 424 of the company's shares (with a recent market valu totaling just over $35,700) to earn that $1,000 per year passive income stream.
Until recently, the company habitually raised its payout every year, sometimes substantially. For instance, in the pandemic-ravaged year of 2022, it cranked its quarterly dividend almost 31% higher to $0.55 per share.
Note that this isn't far from the current $0.59 per share distribution, which it's been paying since early 2023. In other words, its enthusiasm for dividend raises might be fading.
A second quarter to forget
This is understandable when we peruse Dollar General's latest results. In the second quarter, its same-store sales crawled only 0.5% higher; new store openings helped push total net sales up by 4% and change. Worse, headline net income fell off a cliff, plummeting 20% to slightly over $374 million.
Both headline results came in notably below the consensus analyst estimates. On top of that, management also aggressively reduced its forecasts for full-year net and same-store sales, and per-share earnings.
Management attributed this package of negative developments to hesitant consumers, but other retailers in the standard and discount segments are doing better at coping with that challenge. To me, Dollar General is a struggling company that doesn't seem to have a good batten-down-the-hatches strategy to get through tough times. This stock isn't a buy for me just now, despite that attractive dividend yield.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
