The additional stimulus from the $1.9 trillion American Rescue Plan was anticipated — but the new spending adds fuel to the fire of a recovering economy, suggests John Dobosz, income specialist and editor of Forbes Dividend Investor.
Long-term interest rates jumped to a new one-year high. The broad stock market took in stride the continued rise in bond yields with the S&P 500 Index recently hitting a new all-time high.
Meanwhile, the stocks on our buy list are rewarded for superior rates of dividend growth and revenue growth, as well as for high yields and low payout ratios. Operating cash flow over the past 12 months must be positive, and sufficient to cover the dividend.
They also trade at discounts to multiple five-year average valuation measures that include price to sales (P/S), price to book value (P/BV), price to current year expected earnings (P/E), price to cash flow per share (P/CF), and enterprise value/EBITDA. The average dividend yield of stocks in the portfolio is 3.58%.
Our latest new addition — Grand Rapids, Mich.-based SpartanNash (SPTN) — is a multi-regional grocery distributor and retailer that currently operates 155 supermarkets, primarily under the names Family Fare, Martin’s Super Markets, D&W Fresh Market, VG’s Grocery and Dan’s Supermarket.
Through its military division, SpartanNash is a leading distributor of grocery products to U.S. military commissaries around the world, which provide food to active-duty, guard, reserve, or retired members of the military at discounted prices. Its retail division supplies independent grocery retailers as well as company-owned stores.
Revenue over the past 12 months of $9.35 billion was up 12.5% in the most recent quarter. SpartanNash expects revenue to decrease 5% to $8.89 billion in 2021 after a breakneck year in 2020. Expected earnings of $1.81 per share give the stock a 10.7 price-earnings ratio, just below its five-year average P/E of 10.9.
It trades at significant discounts to five-year average multiples of price to sales, book value, and cash flow, as well as enterprise value as a multiple of earnings before interest, taxes, depreciation and amortization.
SpartanNash just hiked its quarterly dividend from $0.1925 to $0.20 per share. Dividends have grown at a 14.4% compound annual rate over the past decade as they have quadrupled since 2011.
Free cash flow of $6.80 per share over the past 12 months easily supports $0.77 per year in dividends. The ex-dividend date for a $0.20 per share payment is Friday, March 12. Earnings are due in late May.
