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Dollar General Rose in 4Q15, Dividend Rose by 14%

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Price movement 

Dollar General (DG) rose by 13.5%. It closed at $85.01 per share at the end of the second week of March 2016. The price movement on a weekly, monthly, and YTD (year-to-date) basis is 13.5%, 22.0%, and 18.3%, respectively.

Currently, Dollar General is trading 14.3% above its 20-day moving average, 16.6% above its 50-day moving average, and 17.1% above its 200-day moving average.

The Vanguard Mid-Cap ETF (VO) invests 0.35% of its holdings in Dollar General. VO tracks the CRSP US Mid-Cap Index—a diversified index of US mid-cap companies. VO’s YTD price movement was -3.0% as of March 10, 2016.

The market caps of Dollar General’s competitors are as follows:

  • Costco (COST) – $67.1 billion
  • Target (TGT) – $50.4 billion
  • Dollar Tree (DLTR) – $18.8 billion
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Performance in fiscal 4Q15 and fiscal 2015

Dollar General reported fiscal 4Q15 net sales of $5,286.9 million—a rise of 7.0% compared to net sales of $4,939.1 million in fiscal 4Q14. The sales of consumables, seasonal, home products, and apparel rose by 7.1%, 7.7%, 7.9%, and 3.3%, respectively, in fiscal 4Q15—compared to fiscal 4Q14.

Its net income and EPS (earnings per share) rose to $376.2 million and $1.30, respectively, in fiscal 4Q15—compared to $355.4 million and $1.17, respectively, in fiscal 4Q14.

Fiscal 2015 results

In fiscal 2015, Dollar General reported net sales of $20,368.6 million—a rise of 7.7% year-over-year. Its net income and EPS rose to $1,165.1 million and $3.95, respectively, in fiscal 2015—compared to $1,065.3 million and $3.49, respectively, in fiscal 2014.

Meanwhile, its merchandise inventories rose by 10.5% and its cash and cash equivalents fell by 72.8% in fiscal 2015. Its current ratio fell to 1.7x and DE (debt-to-equity) ratio rose to 1.1x in fiscal 2015—compared to a current ratio and DE ratio of 1.8x and 0.96x, respectively, in fiscal 2014.

Dollar General’s price-to-earnings and price-to-book value ratios are 21.5x and 4.6x, respectively, as of March 11, 2016.

It repurchased $1.3 billion or 17.6 million shares under its share repurchase program in 2015 at an average price of $74.03 per share. The remaining share repurchase authorization is ~$920 million with no expiration date.

On March 8, 2016, Dollar General declared a quarterly dividend of $0.25 per share—a rise of 14% on its common stock. The dividend will be paid on April 12, 2016, to shareholders as of record at the close of business on March 29, 2016.

Projections

The company made the following projections for fiscal 2016:

  • It expects net sales growth of 7%–10%.
  • It anticipates operating profit of 7%–11%.
  • The EPS growth is expected to be 10%–15%.
  • It expects the cash from operations to be 7%–8% of sales.
  • The company expects capital expenditures of 2%–3% of sales.
  • The EPS growth and dividend yield are expected to be 11%–17%.
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