The relatively high dividend yield of the company appears attractive; however, it is important to consider the context behind it. Dollar General is approaching the tenth anniversary of its dividend, identified by the ticker symbol DG, experiencing an unusual peak in yield in recent weeks. This increase is attributed to a significant decline in stock prices following the company’s earnings report. Investors might be interested in understanding how many shares would be required at these lower prices to achieve $1,000 in annual dividend payments.
### An Eye-Catching Dividend Yield
Currently, Dollar General offers a quarterly dividend of $0.59 per share, translating to an annual payout of $2.36 per share, with a yield of 2.9%. This means an investor would need to hold 424 shares of the company, equating to a market value of just over $35,700, to generate a $1,000 annual passive income. Historically, the company has consistently increased its dividend, notably raising it by nearly 31% to $0.55 per share in 2022, amidst challenging market conditions. However, its recent increase to $0.59 per share early in 2023 suggests a potential slowdown in such raises.
### A Challenging Second Quarter
Dollar General’s recent financial performance has been underwhelming. In the second quarter, same-store sales rose marginally by 0.5%, while new store openings contributed to a total net sales increase of just over 4%. More concerning was the headline net income, which dropped by 20% to slightly above $374 million. These figures fell short of analysts’ expectations. Moreover, the company’s management significantly downgraded forecasts for full-year net sales, same-store sales, and per-share earnings.
Management attributed these negative outcomes to consumer hesitancy, although other retailers, both in the standard and discount sectors, have managed to better navigate these challenges. Dollar General appears to be struggling without a robust strategy to endure difficult times. Despite the attractive dividend yield, the current stock situation may not be favorable for investment.
