Is Family Dollar Stores, Inc. A Bargain?
I'm always on the lookout for new to me dividend growth companies and recently received a request to do a full analysis on Family Dollar Stores, Inc. (FDO). What was really surprising is that Family Dollar Stores has a 38 year history of increasing the dividend to shareholders. Family Dollar Stores is a major player in the discount retail space operating over 8,000 stores throughout the United States. Shares of Family Dollar Stores closed trading on Friday, April 11th at $56.10 giving a current yield of 2.21%.
Discounted Earnings:
Analysts followed by Yahoo!Finance expect Family Dollar Stores to grow earnings 3.15% per year over the next 5 years and I've assumed they can grow at 2.75% in perpetuity. Running these numbers through a discounted earnings analysis with a 10% discount rate and summing over 30 years yields a fair value price of $44.62. This means the shares are trading at a 25.7% premium to the discounted earnings analysis.
Click here to read the rest of the analysis over on Seeking Alpha.
I've updated my Stock Analysis page to include this analysis.
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Discounted Earnings:
Analysts followed by Yahoo!Finance expect Family Dollar Stores to grow earnings 3.15% per year over the next 5 years and I've assumed they can grow at 2.75% in perpetuity. Running these numbers through a discounted earnings analysis with a 10% discount rate and summing over 30 years yields a fair value price of $44.62. This means the shares are trading at a 25.7% premium to the discounted earnings analysis.
Click here to read the rest of the analysis over on Seeking Alpha.
I've updated my Stock Analysis page to include this analysis.
If you'd like to receive posts via email and sign up for my newsletter you can do so here or on the Subscribe page at the top of this blog. As a post/newsletter subscriber, you'll be the first to know about ideas that are running around in my head for the blog.
I like reading your analysis. I agree that FDO is a little overvalue.
ReplyDeleteFFDividend,
DeleteI'm glad you like it. I think FDO is a bit pricey right now especially given what seems like some fairly aggressive expansion plans that have put a bind on the cash flow.
Thanks for stopping by!
Thanks for the analysis! My main concern is that with the consumer in the dumps, why is a dollar store having sales issues!
ReplyDeleteI'd like to get a piece of them though, just have to wait for a better entry!
ILG,
DeleteThat's part of my concern too. Of course none of the dollar stores from any company are all that great to go into. The only time I really ever buy anything from there is if I need some really cheap stuff that I don't need to last more than a day or two.
It's an interesting long term play and I was quite surprised to find out that they had 38 years of DG behind them. It's always interesting to find out about new to me companies.
Thanks for stopping by!