Why Kroger Is A Great Dividend Stock To Own
An Overlooked Dividend Compounder
As you know by my name, I love dividends. And in addition to sharing on here, I write regularly on the investment platform- Seeking Alpha.
My goal there is to teach everyday investors about building wealth, so they won’t to need to work to traditional retirement age.
I want to help you take control of your life, have F.I.R.E.
Here at Dividend Collection Agency the goal is to give investors and/or readers a different perspective. We take a simple approach to building wealth. And although investing may seem easy, people often miss opportunities by over complicating it. But we are here to help.
Current Price: $67.10
Portfolio Purpose: Income 💰 & Growth 📉
Amid economic uncertainty, few retailers have shown Kroger’s (KR) consistency. Shares are up over 50% since early 2023—slightly ahead of the S&P 500. This has been driven by strong execution, disciplined cost control, and a renewed focus on store brands and digital growth.
Q2 Recap: A Strong Return to Growth ↗️
Kroger’s most recent quarter delivered a notable turnaround from its softer 2022 & 2023.
Same-store sales (except fuel) grew 3.4%; far better than Albertsons’ (ACI) 2.2%.
EPS of $1.04 beat estimates & rose 5% YoY.
E-commerce surged 16%, surpassing last year’s 10%.
Gross margins expanded 40 basis points to 22.5%.
The grocer also closed 60 unprofitable stores and reaffirmed digital investments as a major growth priority heading into 2026.
Q3 Preview: Earnings Dip, Revenue Uptick 💵
Analysts expect:
A slight EPS dip (-$0.01)
A modest revenue increase
This cautious outlook is driven by a $2.6B impairment charge, which will temporarily weigh on the bottom line. I expect Q3 EPS between $1.02–$1.06, supported by store-brand strength and buyback-driven EPS leverage.
Guidance Raised—Again 👍🏾
Management lifted full-year guidance across:
Sales
Operating profit
EPS
Identical sales for 2024 came in at 1.5%, margins continue to expand, and Kroger expects sharper improvement if interest rates ease in 2025.
Dividend Growth & Capital Returns 💰
Kroger raised its dividend 9.4% in June. Its 19th consecutive increase. And they continue to target 8–11% annual shareholder returns.
Other financial highlights:
Shares outstanding fell from 722M → 661M
Cash from operations climbed to $3.69B
Free cash flow: $1.72B
Dividend payout ratio: 24.5% (very safe)
Leverage: 1.63x, below peers CASY (1.8x) and ACI (2.2x)
KR has $7.5B in buybacks on pace to be exhausted, with an additional $2.5B planned to follow.
Valuation: Still Reasonable 🆗
At ~$67 per share and midpoint guidance, Kroger trades at a forward P/E of ~14.2x. This is far cheaper than peers:
Casey’s (CASY): ~30x
Walmart (WMT): ~40x
Applying a modest 15x multiple yields a $85 price target (26% upside).
A re-rating toward 18–20x is possible if e-commerce and private-label momentum persists.
Partnerships with Uber Technologies (UBER), DoorDash (DASH), and Instacart (CART) and other potential acquisitions could further expand market share.
Risks ⚠️
Sales remain slightly down YTD
Rising unemployment could pressure 2026 demand
Recession risk may compress margins
Competition from Walmart, Casey’s, and Albertsons remains intense
But I still believe that Kroger’s cost reductions, store closures, and strong brands keep them positioned better than most food retailers.
Bottom Line ✅
Kroger remains a resilient, highly cash-generative business with:
Expanding margins
Consistent share buybacks
Under-appreciated e-commerce growth
A long runway in private-label products
Very reasonable valuation
Despite macro uncertainty, I continue think Kroger is a good by for those looking for income and solid long-term upside.
Happy Investing!
If you’re looking to start investing check out our investment group over on Seeking Alpha for 2 weeks FREE. Click the Seeking Alpha link here. Click investing group, learn more, or the blue hyperlink in my bio.
This is not financial advice. I am not a licensed professional. This is for educational purposes only. Please do your own due diligence.
Like & subscribe if you’re active duty, a veteran, or just love investing.