Kroger Outshines Rivals In Tough Supermarket Business

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Supermarket operators have a tough job navigating fierce competition, thin profit margins and volatile food prices.

ButKroger ( KR ), the nation's biggest grocer, has been faring well.

The stock is up 23% this year, more than double the S&P 500. And the dividend yield is 1.9%, almost matching the S&P average of 2.0%.

Kroger last year boosted its quarterly dividend by 30% to 15 cents a share, or 60 cents annually. The next payout is due June 1 to shareholders of record on May 15. Kroger reinstated its dividend in 2006 and said it plans to keep raising the payout each year.

The operator of Kroger, Ralphs and Food 4 Less chains reported last month that profit for the latest quarter jumped 76% on a 13% increase in sales. Both figures were the best in years.

The company also issued a better-than-expected full-year outlook, saying business remains strong despite the payroll tax hike and higher gasoline prices.

Kroger is 18% past a 27.21 buy point from a flat base, putting it well out of buying range. It's pulled back from a 52-week high March 28 but isn't flashing any sell signals.

The stock enjoys an IBD Composite Rating of 98, highest in the 22-member supermarket industry group.

Kroger also boasts an Accumulation/Distribution Rating of A, indicating strong institutional demand for the shares.

Kroger said in March that it's trying to create a loyal customer base by improving freshness and assortment in perishable items, strengthening its pharmacy business and engaging shoppers through mobile phone apps. It said customers downloaded a record 500 million digital coupons in December, while visits to its mobile site have more than doubled.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

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