Tags: Supervalu | dividend | debt | SVU

Supervalu: Big Dividend, Even Bigger Debt

By    |   Thursday, 09 February 2012 10:35 AM

Grocery store operator Supervalu (SVU) sports a big dividend, along with even bigger debt load. Given this financial baggage, investors might not be wooed by the tempting yield.

Supervalu is in two businesses. As the third-largest U.S. supermarket operator, it has more than 1,100 food stores flying well-known banners such as Albertson’s, Shaw’s and Farm Fresh. There are also 381 discount food stores, such as Save-A-Lot.

The second Supervalu business is supplying groceries to 1,900 other stores. By relying on economies of scale, Supervalu aims to drive down prices company-wide.

Sagging sales have plagued Supervalu, though. For the third-quarter of fiscal 2012, Supervalu reported total sales of $8.3 billion, a loss of 3.9 percent from $8.6 billion in 2011. Net income for the quarter was 24 cents, up 125.5 percent.

Supervalu CEO Craig Herkert praised his company’s business transformation when noting third-quarter results. Still, Supervalu lowered its 2012 sales estimate. Analysts also lowered their consensus earnings estimates to $1.23 per share, compared to a loss of $7.13 in 2011.

For 2013, the Wall Street estimate also is $1.23 per share.

Weighed down

Supervalu does pay a hefty 5 percent dividend. However, in 2010 the company sliced its dividend nearly in half after sales slumped. Supervalu also is burdened with $6.6 billion in debt, partly taken on after acquiring Albertson’s in 2006.

S& P analysts have a hold rating on Supervalu, citing its crumbling identical-store sales and an intensely competitive food industry.

The company next reports on April 16.

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