Discussing Dollar General’s shareholder returns
Dollar General (DG) has been trading on the New York Stock Exchange since 2009. The company had traded on the stock exchange for around 40 years until it was acquired by Kohlberg Kravis Roberts’ (KKR), an affiliated investment fund, in July 2007. KKR exited Dollar General in December 2013.
After being relisted in 2009, Dollar General’s stock price has risen over 200%. Over the last three years, the stock price grew 13%, compared to 35% growth in Dollar Tree’s (DLTR) stock price in three years.
Looking at year-to-date performance, we see that Dollar General’s stock price is down 7.2% compared to a decline of 0.9% in Dollar Tree’s stock price. Dollar Tree’s better past performance and expected future earnings improvement are the likely reasons behind the company’s stock doing better this year. Read more about the earnings expectations for the two discount retailers in the next part of this series.
Dividends and share repurchases
Dollar General boosts its shareholder’s returns by paying regular quarterly dividends and repurchasing shares. The company has paid regular dividends since it reinstated the dividend program in fiscal 2015.
In fiscal 2016, the company returned $1.3 billion to investors via dividends and repurchasing shares. The company bought back 12.4 million shares worth $990 million.
Over the last five years, it has repurchased 74.4 million shares for $4.6 billion. In fiscal 2017, the company plans to buyback $450 million worth of shares.
Comparing dividend yields
Dollar General’s stock offers a dividend yield of 1.5%. This yield is lower than most dividend-paying retailers. Dividend yields on Walmart (WMT) and Target (TGT) are hovering around 2.5% and 4.6%, respectively.
In 2015, the company had set a target of achieving annual shareholder returns between 11% and 17%. In fiscal 2016, shareholder returns stood at 14.5%, including 13.1% in EPS growth and 1.4% in dividend yield.
Investors looking for exposure to Dollar General through ETFs can consider the Van Eck Retail RTF (RTH), which invests 2.7% of its total holdings in the company.