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Kroger (KR) Ups Dividend: Here're Few More Things to Know

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Most companies resorted to various cost-containment measures to counter the liquidity crisis, when the pandemic gripped the economy. These included pay cuts or furloughs, curtailing capital expenditures, and even halting share repurchases or pulling back dividends. More than a year later, things are looking up courtesy of stimulus package and swift vaccination drive. Market pundits are of the opinion that resumption of normal business activities could pave the way for dividend hikes and share buybacks this year. Well, for now investors have some more good news from The Kroger Co. KR, following an impressive first-quarter fiscal 2021 performance by this operator of supermarket chain.

This Cincinnati, OH-based company has announced an increase in its quarterly dividend. Impressively, the hike marked Kroger’s 15th successive year of dividend increase. The company’s board of directors raised the quarterly dividend by 17% to 21 cents a share, which is payable on Sep 1, 2021 to shareholders of record at the close of business on Aug 13, 2021. Last year in June, the company increased its regular quarterly dividend by 13% to 18 cents.

The latest dividend increase brings its annualized dividend to 84 cents a share compared with the prior rate of 72 cents. The hike reflects the company’s dividend yield of 2.1%, based on its closing share price of $39.15 on Jun 24. The quarterly dividend has increased at a double-digit compounded annual growth rate since it was reinstated in 2006.

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Kroger is among those handful of companies that continued to reward shareholders even amid the crisis. Backed by sound fundamentals, the company has time and again highlighted its commitment to enhancing shareholder value. The current hike reflects strong cash flow generation capability driven by better execution of operating plans. Management expects to generate free cash flow between $1.8 billion and $2 billion in fiscal 2021.

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Zacks Investment Research

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Impressively, the company has been undertaking efforts to strengthen position not only with respect to products but also in terms of the way consumers prefer shopping. It has been making significant investments to enhance product freshness and quality, and expand digital capabilities. Notably, Kroger has been introducing new items under its “Our Brands” portfolio — launched 253 new items during the first quarter of fiscal 2021.

The company’s “Restock Kroger” program involving investments in omni-channel platform, identifying margin-rich alternative profit streams, merchandise optimization, and lowering of expenses have been gaining traction. Realizing the need of the hour, Kroger has been offering a no-contact delivery option, low-contact pickup service and ship-to-home orders. It expanded to 2,233 Pickup locations and 2,488 Delivery locations. It has expanded the partnership with 80 Acres Farms to 316 stores.

Management anticipates fiscal 2021 earnings between $2.95 and $3.10 per share and FIFO operating profit in the band $3.5-$3.7 billion. We note that shares of this Zacks Rank #3 (Hold) company have advanced 26% in the past six months against the industry’s decline of 4.1%.

3 Stocks Hogging the Limelight

Target TGT has a trailing four-quarter earnings surprise of 62.1%, on average. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco COST has a trailing four-quarter earnings surprise of 7.7%, on average. The stock carries a Zacks Rank #2 (Buy).

Dollar General DG, a Zacks Rank #2 stock, has a trailing four-quarter earnings surprise of 18.1%, on average.

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