Whether it was uncertainties brought by the COVID-19 pandemic or challenges from rising interest rates, the grocery store industry has proven to be remarkably resilient. But Canada’s New Democratic Party leader Jagmeet Singh is not a fan.
“The truth is Loblaws makes $1 million in EXCESS profits a day,” Singh says in a tweet. “And while you struggle, Liberals and Conservatives take donations from them and stay silent.”
Loblaws Companies L operates one of the largest grocery store chains in Canada. It has more than 2,400 stores across the country, including the Loblaws banner and other popular brands such as Shoppers Drug Mart, No Frills and Real Canadian Superstore.
So how much profit does the company actually make?
A Lucrative Business
2022 was a difficult year for some industries, but Loblaws continued to grow both its top and bottom lines.
For the year, the company brought in C$56.5 billion of revenue, representing a 6.3% increase year over year. Adjusted earnings came in at C$2.26 billion, up 18.4% from 2021.
It’s no surprise, though. Around 90% of Canadians live within 10 kilometers of one of Loblaw’s locations. And no matter what happens to the economy, people still need to buy food.
Plus, in times of rampant inflation, established grocery store operators can often pass along rising costs to consumers.
By running a resilient and profitable business, Loblaws also increased its dividend last year. In fact, grocers have long been a staple for investors looking for passive income.
Of course, you don’t need to go north of the border to tap into the segment. There are plenty of grocery store companies in the U.S. that reward shareholders with reliable and increasing dividends. Here’s a look at two of them.
Kroger KR
Supermarket giant Kroger hasn’t been a market favorite over the past year as shares tumbled nearly 20%. But its business is still heading in the right direction.
In the company’s fiscal 2022, which ended Jan. 28, 2023, total sales increased 7.5% to $148.3 billion. Same-store sales, a critical measure of a retailer’s performance, grew 5.6%.
At the bottom line, Kroger generated adjusted earnings of $4.23 per share in fiscal 2022, up 15% from the prior fiscal year.
Notably, despite dealing with rising costs due to inflation, Kroger’s cost savings exceeded $1 billion for the fifth consecutive year.
Last summer, the company announced a 24% increase to its quarterly dividend to 26 cents per share.
That marked Kroger’s 16th consecutive annual dividend hike. At the current share price, the company offers an annual dividend yield of 2.3%.
In the latest earnings release, Kroger said that it “expects to continue to pay its quarterly dividend and expects this to increase over time, subject to board approval.”
Walmart WMT
When it comes to paying dividends in the grocery business, few companies have done a better job than Walmart.
Since declaring its first annual dividend in March 1974, Walmart has increased its payout every single year.
The latest dividend hike arrived this February when Walmart’s board approved a 2% increase to the annual cash dividend to $2.28 per share. That marked the company’s 50th consecutive year of dividend increases.
Those dividend hikes are backed by Walmart’s deeply entrenched market position. The company has over 10,500 stores and numerous e-commerce websites in 20 countries, attracting around 240 million customers every week.
Due to its sheer size, Walmart’s numbers dwarf most competitors, but they are still increasing. In the 12 months that ended Jan. 31, total revenue grew 6.7% to $611.3 billion. On a constant currency basis, revenue would have increased by 7.4% to $615.1 billion.
The company currently offers an annual dividend yield of 1.5%.
If you are searching for high-yield ideas, it might be worthwhile to look beyond the stock market. These days, it’s easy for investors to tap into real, income-producing assets like multifamily real estate, even if you are not an ultra-high net worth individual.
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