Down 23% & 4.5% Dividend Yield | This Dividend Stock is ON SALE!

Summary

In this episode of the Dividend Diplomats, hosts Lanny and Bert discuss Spartan Nash (SPTN), a consumer grocery stock that has significantly dropped in 2024 but may present an undervalued dividend stock opportunity. Despite a 21% yearly decline and a Q4 earnings miss, the company has shown positive year-to-date results with a focus on adjusted EBIT growth. With a 4.6% dividend yield and a history of dividend growth, Spartan Nash could be a compelling investment for those seeking passive income growth, especially considering its current low payout ratio and potential as a merger target.

Takeaways

• 📉 Spartan Nash (SPTN) is a stock that has significantly dropped in 2024, with a 21% decrease YTD and a 24% decrease since the previous year, making it an interesting option for value investors.
• 💰 The company operates in the consumer grocery and food industry, with a unique business model that includes government contracts, a grocery division, and a wholesale division, diversifying their income sources.
• 📈 Despite recent challenges, Spartan Nash reported positive year-to-date results with $9.7 billion in net sales, a 1% increase, and $52 million in net earnings, marking a 51% year-over-year increase.
• 🔍 The company's adjusted EBITDA grew by 6%, showcasing resilience in a high inflationary environment typical for food distributors.
• 🛒 Spartan Nash provides a wide range of grocery goods to various entities, including direct consumers, grocery stores, government entities, and major wholesale clients like Amazon.
• 📊 The stock is currently trading at $1,1891 with a forward P/E ratio of 9.41, which is significantly below the S&P 500 average, indicating a potential undervaluation.
• 💹 The company has a history of growing dividends for 13 consecutive years and is on track to make it 14, albeit with a modest average growth rate of 3.39%.
• 💰 The dividend yield is currently at 4.6%, which is 60 basis points higher than its five-year average, offering a relatively attractive return for investors.
• 📈 The stock's performance has been impacted by inflationary pressures and lower demand from key customers like Amazon, leading to concerns about future growth prospects.
• 🤝 The company's strong ties with the government and its diversified revenue streams make it a potentially attractive acquisition target for larger entities looking to expand in the consumer goods sector.

Q & A

What is the main topic of discussion in the video?

The main topic of discussion is the analysis of Spartan Nash (SPTN), a stock that has significantly dropped in value in 2024, and whether it could be an undervalued dividend stock to consider purchasing.

How has Spartan Nash's stock performance been in 2024?

In 2024, Spartan Nash's stock has underperformed, with a decrease of 21% and has been facing challenges due to inflation and lower demand from major wholesale clients like Amazon.

What are the three main business segments for Spartan Nash?

The three main business segments for Spartan Nash are consumer grocery, food service, and military business.

What was the net sales and net earnings for Spartan Nash in the recent financial year?

Spartan Nash reported net sales of $9.7 billion, which was a 1% increase, and net earnings of $52 million, marking a 51% year-over-year increase.

How has Spartan Nash's adjusted EBITDA performed in the recent financial year?

Spartan Nash's adjusted EBITDA increased by 6% compared to the previous year, reaching $257 million.

What is Spartan Nash's dividend yield and how does it compare to its five-year average?

Spartan Nash's dividend yield is 4.6%, which is 60 basis points higher than its five-year average dividend yield of 4%.

How long has Spartan Nash been growing its dividend and at what average rate?

Spartan Nash has been growing its dividend for 13 consecutive years, with an average rate increase of 3.39%.

What is the payout ratio for Spartan Nash and does it indicate a safe dividend?

The payout ratio for Spartan Nash is 43%, which is considered safe as it is well below the 60% threshold.

What is the stock's price to earnings (PE) ratio based on the information provided?

The stock's price to earnings (PE) ratio is 9.41, which is significantly below the S&P 500 average.

What potential future scenarios do the speakers consider for Spartan Nash?

The speakers consider Spartan Nash as a potential acquisition target due to its significant contracts and presence in the market, as well as its potential for appreciation if it can rebound from its current challenges.

What advice do the speakers give to viewers regarding investing in Spartan Nash?

The speakers suggest that viewers should do their own research and consider adding Spartan Nash to their watch list. They also mention that it might be a good time to buy a small number of shares to lower their cost basis if they already own the stock.