Updated on December 12th, 2023
Grocery stocks are in an uncertain position. Industry trends are changing as more consumers gravitate toward online shopping and grocery delivery, which accelerated during the coronavirus pandemic.
Meanwhile, competition among grocery stocks is heating up. E-commerce giant Amazon.com (AMZN) made a huge entry into grocery with its ~$14 billion acquisition of Whole Foods and is in the process of rolling out its cashier-less technology.
Other grocery stocks such as Costco Wholesale (COST), Walmart Inc. (WMT), Kroger (KR), and Target (TGT) have seen great success with their own e-commerce platforms.
Many of these grocery stocks remain attractive for dividend growth investors. For example, Walmart and Target are both members of the Dividend Aristocrats.
The Dividend Aristocrats are a group of 68 stocks in the S&P 500 Index with 25+ years of consecutive dividend increases.
The requirements to be a Dividend Aristocrat are:
- Be in the S&P 500
- Have 25+ consecutive years of dividend increases
- Meet certain minimum size & liquidity requirements
You can download an Excel spreadsheet of all 68 Dividend Aristocrats (with important financial metrics such as dividend yields and payout ratios) by clicking the link below:
Costco and Kroger are members of the Dividend Achievers list, a group of stocks with 10+ years of consecutive dividend growth.
You can see the entire list of all ~400 Dividend Achievers by clicking here.
These retailers are all making progress to better compete with Amazon, adapt to the changing consumer demands, and continue generating growth.
This article will discuss the top 7 grocery stocks ranked in order of expected total returns (ETRs).
Table of Contents
We have ranked the top 7 grocery stocks according to expected returns. The grocery stocks are listed from lowest to highest five-year expected total returns. You can use the following links to instantly jump to any specific stock:
- Best Grocery Stock #7: Costco Wholesale Corp. (COST)
- Best Grocery Stock #6: Walmart Inc. (WMT)
- Best Grocery Stock #5: Albertsons Corporation (ACI)
- Best Grocery Stock #4: SpartanNash Co. (SPTN)
- Best Grocery Stock #3: Dollar General Corp. (DG)
- Best Grocery Stock #2: Kroger Co. (KR)
- Best Grocery Stock #1: Target Corporation (TGT)
Best Grocery Stock #7: Costco Wholesale (COST)
- 5-year expected annual returns: 5.4%
Today, Costco is a diversified warehouse retailer that operates about 830 warehouses, collectively generating about $245 billion in annual sales.
Costco posted fourth quarter and full-year earnings on September 26th, 2023, and results were better than expected on both the top and bottom lines, continuing its impressive streak of revenue and earnings growth.
The company posted adjusted earnings-per-share of $4.86, which was eight cents better than estimates. Revenue was $78.94 billion, which was well ahead of expectations of $77.72 billion.
Click here to download our most recent Sure Analysis report on Costco (preview of page 1 of 3 shown below):
Best Grocery Stock #6: Walmart Inc. (WMT)
- 5-year expected annual returns: 5.7%
Walmart traces its roots back to 1945 when Sam Walton opened his first discount store. The company has since grown into one of the largest retailers in the world, serving over 230 million customers each week. Revenue will likely be around $600 billion this year.
Walmart posted third quarter earnings on November 16th, 2023, and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to $1.53, which was a penny ahead of estimates. Revenue was up 5.2% year-over-year to $160.8 billion, and was $2.26 billion better than expected.
US comparable sales were up 4.9% year-over-year, which was 150bps better than expected. Transactions rose 3.4%, while average ticket rose 1.5%. E-commerce contribution to comparable sales was down 300bps.
Click here to download our most recent Sure Analysis report on Walmart (preview of page 1 of 3 shown below):
Best Grocery Stock #5: Albertsons Corporation (ACI)
- 5-year expected annual returns: 8.7%
Albertsons (ACI) is one of the largest food and drug retailers in the United States. With $70 billion in sales, a market cap of $11.6 billion and a history dating back to the 1860s. However, Albertsons only went public in 2020 and has paid a quarterly dividend since.
The second quarter delivered solid operational results, despite the increasing macro-economic headwinds. As the company looks ahead to the balance of the year, management’s focus remains the same — advancing operational excellency, driving growth in its digital and pharmacy operations, and deepening its relationships with customers.
Click here to download our most recent Sure Analysis report on Albertsons Corporation (preview of page 1 of 3 shown below):
Best Grocery Stock #4: SpartanNash Co. (SPTN)
- 5-year expected annual returns: 9.9%
SpartanNash is a value-added wholesale grocery distributor and retailer. The corporation supplies 2,100 independent grocery retail locations in the United States.
The company itself also owns 147 supermarkets in nine states. SpartanNash operates under retail banners such as Dan’s Supermarket, D&W Fresh Market, Econofoods, Family Fare, Forest Hill Foods, No Frills, Supermercardo Nuestra Familia, and more. The company is also a distributor of grocery products to U.S. military commissaries.
SpartanNash reported third quarter 2023 results on November 8th, 2023. Net sales of $2.26 billion was a 1.4% decrease from $2.30 billion in the same prior year period. Adjusted earnings from continuing operations decreased by 1.8% yearover-year to $0.54 per share and Adjusted EBITDA rose 6.3% year-over-year to $60.9 million.
Click here to download our most recent Sure Analysis report on SpartanNash (preview of page 1 of 3 shown below):
Best Grocery Stock #3: Dollar General Corp. (DG)
- 5-year expected annual returns: 10.6%
Dollar General Corporation opened its first dollar store in 1955. Today, it is the leading U.S. “dollar store.” About 80% of its items are offered at $5 or less.
Dollar General sells a wide variety of merchandise in four categories: consumables, seasonal, home products, and apparel. About 77% of sales are from consumables.
Dollar General reported Q3 FY2023 year results on December 7th, 2023. The company is experiencing weakness and 2023 will be challenging. But Dollar General is still growing albeit more slowly because of new store openings and higher customer traffic, offset by store closures and lower transaction amounts. But high inflation is affecting input costs.
Click here to download our most recent Sure Analysis report on DG (preview of page 1 of 3 shown below):
Best Grocery Stock #2: Kroger Co. (KR)
- 5-year expected annual returns: 11.5%
Founded in 1883, Kroger has nearly 2,800 retail stores under two dozen banners and fuel centers, pharmacies, and jewelry stores in 35 states. The company serves about 11 million customers a day.
On October 14th, 2022, Kroger announced that it had entered into a definitive merger agreement with Albertsons Companies. Kroger will purchase all of Albertsons’ outstanding shares at $34.10 per share, for a total value of roughly $24.6 billion.
On September 8th, 2023, Kroger reported second quarter 2023 results for the period ending August 12th, 2023. (Kroger’s fiscal year ends the Saturday closest January 31st.)
For the quarter, Kroger reported $33.9 billion in sales, down 2% compared to Q2 2022. Excluding fuel, sales increased 1.1% compared to the year ago period. Adjusted earnings-pershare equaled $0.96 compared to $0.90 in 2Q22.
Click here to download our most recent Sure Analysis report on Kroger (preview of page 1 of 3 shown below):
Best Grocery Stock #1: Target (TGT)
- 5-year expected annual returns: 11.7%
Target is a discount retail operations solely in the U.S. market. Its business consists of about 2,000 big box stores offering general merchandise and food and serving as distribution points for its burgeoning e-commerce business.
Source: Investor Presentation
Target posted third quarter earnings on November 15th, 2023, and results were much better than expected on both the top and bottom lines.
Revenue came to $25.2 billion, which was down 4.2% year-over-year, but was $160 million better than expected. Comparable sales fell 4.9%, which was attributable to a physical store sales decline of 4.6%, and a comparable digital sales decline of 6.0%. Adjusted earnings-per-share came to $2.10, which was a staggering 62 cents better than expected.
Click here to download our most recent Sure Analysis report on Target Corporation (preview of page 1 of 3 shown below):
Final Thoughts
The grocery industry is changing like never before. Now that Amazon has acquired Whole Foods, the company will likely accelerate its push into the grocery industry even further, especially with new technologies such as cashier-less stores.
That said, the top grocery stocks have decades of experience in the retail industry. They have proven the ability to navigate difficult conditions before and adapt when necessary.
Broadly speaking, the grocery industry is attractive for investors right now. Investors looking to buy grocery stocks should focus on those with durable competitive advantages and the financial strength to continue investing in growth.
Target and Walmart have the longest histories of annual dividend increases, while Kroger, Costco, SpartanNash, and Dollar General also have meaningful dividend growth histories.
Additional Resources
At Sure Dividend, we often advocate for investing in companies with a high probability of increasing their dividends each and every year.
If that strategy appeals to you, it may be useful to browse through the following databases of dividend growth stocks:
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 48 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: