Tuesday, March 8, 2011

Stock Idea: Kroger Co. (KR, $23.67)

(May 16, 2011 update: All future stock posts will appear on my new subscription-only website at www.GoodfellowLLC.com. Please visit!)

Kroger Co. (KR)
is a manufacturer and retailer of groceries and fine jewelry in the United States.

Kroger's consensus EPS are projected to increase 9.1%, 11.5% and 7.0% in fiscal years 2012 through 2014. Kroger pays a dividend of $0.42 per share, with a yield of 1.78%.

On March 3, Kroger's Board of Directors announced a new $1 billion stock repurchase program. This means that the company is in a very good cash position, and intends to use some of it to buy back stock. For shareholders, this implies a less risky stock, because whenever the price falls a bit, the company steps in and buys back shares, providing strong price support for the stock. In addition, share buybacks serve to decrease the number of shares outstanding, thereby increasing the earnings per share (EPS) numbers. Companies with increasing EPS can typically garner higher share prices. (Kroger reduced shares outstanding via share buybacks by 12.2% between its fiscal years ended in 2005 and 2010.)

Kroger stock has not been as volatile as the market, falling only 30% in value during the financial meltdown of 2008. Since that time, the stock has traded consistently between $20 and $24. It looks like it's finally ready to move higher.

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The Right Huff is Crista Huff's blog for politics and items of sociological or financial interest. Crista Huff also manages Goodfellow LLC, a subscription-only stock market website. We strive to identify financially healthy companies in which traders and investors can buy shares and earn dividends and capital gains. See disclaimer for the risks associated with investing in the stock market. See your tax advisor for the tax consequences of investing. See your estate planning attorney to clarify beneficiary and inheritance issues associated with your assets.

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