This May be One of the Safest Retailers on the Market

Aug 30, 2022

Investors may want to keep an eye on oversold shares of Dollar General (DG).

After pulling back from about $255 to $235, the stock appears to have caught strong support.  RSI, MACD, and Williams’ %R are all oversold as well.  In fact, the last time these indicators became this oversold, shares of DG ran from about $185 to $255.

Better, we can see just how strong dollar stores have been, despite inflationary threats.

Just last week, Dollar General reported Q2 earnings of $2.98 a share, which was better than the expected $2.94 a share.  Sales were up to $9.4 billion, which met forecasts.  Same-store sales were up 4.6% as compared to expectations for 3.9%.  Then, it increased its same-store sales forecast to a range of 4% to 4.5% for the fiscal year, from a prior call for 3% to 3.5%.

Helping, Guggenheim analyst John Heinbockel reiterated a buy rating on the DG stock.  According to Barron’s: “Dollar General stands out on several fronts,” Heinbockel writes, with comparable sales accelerating in recent months, a trend that “bodes well for the second half of 2022 and beyond.” 

Guggenheim wasn’t the only firm raising its target.

Piper Sandler raised its price target on DG to $273 from $265.  Raymond James raised its target price to $285 from $160.  Morgan Stanley raised its target to $270 from $250.  And Deutsche Bank says Dollar General is one of the few stable retailers.  

Even better for the stock, with inflation showing no signs of cooling off, dollar stores are attracting higher-income shoppers.   “The consumer is trying to make ends meet, and when you have limited funds in your wallet, the dollar stores provide the ability to do that,” added Joseph Feldman, a senior analyst at Telsey Advisory Group, as quoted by The New York Times.

Even more attractive, Dollar General will also pay a dividend shortly.

On August 23, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.55 per share on the Company’s common stock, payable on or before October 18, 2022 to shareholders of record on October 4, 2022. 

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