If you read any news, you probably know we live in very partisan times. According to many, the level of the divide in our country is higher than ever. But if you're a history buff, you know better.
The country has always been divided on major issues.
Immigration is a hot topic. Just like it was in the 1980s, the early 1900s and late 1800s. Politicians have hurled personal insults at each since the election of 1796 when John Adams and Thomas Jefferson turned from friend to enemy.
What is different this time around is the visibility of these debates (and thus our awareness of and participation in them). Many of us don't study history as closely as we should, so we believe each debate is unprecedented. But the only thing that is actually unprecedented is our personal knowledge of the debates.
It helps that, in our modern era, everyone seemingly wants to turn everything into a debate. Even the most trivial of differences...
Take, for example, this article I read a few days ago pitting Apple stores against dollar stores, claiming that they are at opposite extremes of the political, economic, social and cultural divides of the country. Pretty big stakes for a couple of retailers.
But here's the thing (and yet another example of why it's so important to look at things from a historical perspective): This is not an example of a dividing point. It's an example of how entrepreneurs strive to serve economic niches.
Stores catering to different demographics is nothing new. And while the Apple stores that dot our local shopping centers may be a relatively recent phenomenon, dollar stores have existed for decades.
My Latest Trade: Dollar General
The most recent trade I recommended to my Income Trader readers is Dollar General (NYSE: DG ), a company that dates back to 1939. Back in the beginning, "J.L. Turner and Son Wholesale" was a wholesale and retail business, featuring a variety of goods at low prices. In 1955, the Turner family opened its first Dollar General store and advertised that nothing cost more than $1.
The idea took off. Today, Dollar General has more than 14,000 stores and expects to open 900 more this year. And everything is still about $1 (or sometimes a little more).
Dollar General stores are often associated with low-income customers, but they have products people of all income brackets are shopping for. Its food products, priced at $1, are attractive to low-income households. But I know many people who shop at Dollar General for holiday decorations and for $1 toys. The company serves all of America.
DG breaks its sales into four broad categories. The consumables category includes cleaning products, health and beauty products, snacks, perishables, packaged food, and pet supplies and food. Consumables accounted for 75% of sales last fiscal year.
Seasonal products -- those products that many shoppers drop in for -- include toys, greeting cards, and home and garden decorations. These products contributed to 13% of sales. The home products category (kitchen supplies, candles, light bulbs, frames, craft supplies, and storage containers) provided 7% of revenue. Clothing accounts for 5% of revenue and includes $1 packages of disposable diapers, a lifeline for low-income families that may not be available anywhere else.
By delivering what customers want and need, DG has room to grow, but growth is driven by the supply chain. DG establishes a distribution center in a region and then builds stores around that center. This helps to keep products on the shelves and consumers coming back.
One way to determine whether customers are satisfied is with same store sales. This is a metric retailers track for stores that are open at least one year. DG has reported same stores sales growth for 28 straight years .
Expansion also adds to sales growth. Over the past five years, sales have grown an average of 7.9% a year. The industry average for same store sales growth is only 1.9%, so Dollar General's performance here is significantly better than most discount stores. Earnings per share ( EPS ) growth is also above the industry average (34.7% for this year versus 18.2%).
But most importantly, Dollar General knows how to grow cash flow .
Cash flow is used to manage the company's growth. Management uses cash flow from operations to build new distribution centers, open new stores, and reward shareholders with buybacks and dividends.The company's reported cash flow from operations has increased over the past five years. Analysts expect cash flow to continue to grow. This is based, in part, on management's guidance for net sales growth of 9% this year. Earnings are expected to between $5.95 and $6.15 per share.
Based on expected earnings, the stock is trading with a price-to-earnings (P/E) ratio of about 16, below the industry average ratio of 20. With better-than-average financials and faster-than-average growth, DG is a bargain .
How I'm Trading Dollar General
Now, most investors would simply take the information I've presented here and decide to buy shares of DG. That's fine. They'll probably do well over time (although the stock's 1.2% yield leaves a little left to be desired).
But my Income Trader subscribers and I aren't like most investors. Instead, we recently used our conservative options strategy to take advantage of this potential buying opportunity and generate some extra income on the side!
In fact, we'll make twice as much income in about five minutes as most investors in DG will all year. What's more, once the trade is over, we can do it again and again throughout the year if we want.
If doubling or even tripling your income stream sounds appealing to you, you can learn more about how this works right now by clicking here . You'll also have the chance to join me and my Income Trader readers for a risk-free trial, and you'll get access to the award-winning indicator I've personally developed to help identify these trades. To learn more, go here .