Dividends and Added to the grocery list: sustainable dividends

Since the shutdown because of the coronavirus, one of the areas which remained open for consumers was the grocery stores. The first couple of weeks, there was a run on the stores, but supply chains adapted. When you consider the grocery stores, you have to consider supply systems – normally there are two an institutional component and a store component. The institutional supply is designed for high volumes so they do not need 12 eggs carton, they need 30 egg cartons. You can go through the other sections, or at some grocery stores they cater to the wholesale market and you can see the larger sizes. Most of us who shop in the consumer stores would never need that much product, for the shelf life when opened would mean we would have to throw things away. The shutdown has meant the institutional side of the business had to adapt to the consumer side of the business and it has not been easy, which is why the experts will tell you there is plenty of food, just not in the right package.

All supermarket chains are selling more product because everyone needs to eat and they have been cooking at home more. This means one of the few places a reasonably healthy person can go is the supermaket, which is good for the supermarket.

Scott Clayton of the TSI Network and associate editor of TSI Dividend Advisor examined top supermarkets in Canada and the US which offer high sales, expanded online sales, and dividends.

TSI Dividend System awards a point system:

1 point for 5 years of continuous dividend payments, 2 points for more than 5 years

2 points if the company has raised the payment in the past 5 years

1 point for management’s commitment to dividends

1 point for operating in non-cyclical industries

1 point for limited exposure to foreign currency rates and freedom from political interference

2 points for long term record of positive earnings and cash flow sufficient to cover dividend payments

1 point for an industry leader

Companies with 10 -12 points have the most secure dividends

7-9 above average

4-6 average

1-3 below average

Company Div Sustain Points Mkt Cap Div 1 Yr Return Recent

Rating $ bil Yld % % Price $

Kroger Highest 10 25.0 2.0 25.8 32.03

Walmart Highest 10 365.4 1.7 25.6 128.76

Loblaw Highest 10 26.4 1.7 10.0 72.83

Metro Highest 10 15.1 1.5 17.9 59.83

Costco Highest 10 138.7 0.8 26.0 310.27

Linking to dividend paying stocks, when you examine the list TSI makes most of the points are not highly embedded in the Annual Report, you can easily determine the points without being a math person. Every company which pays a dividend has a list on its web pages under investor and says what the dividends which were paid. You can see if the numbers are going up or not, in the President’s message you can read if they are committed to the dividend. The idea of any investing is trying to make it easy for you to determine if you should hold or not. If the answer is yes, then you do not have to do anything till the next year. Let your dividends come in.

There are more questions than answers, till the next time – to raising questions.

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