Safeway Inc. (SWY), SUPERVALU INC. (SVU), The Kroger Co. (KR): Do These Stocks Belong on Your Grocery List?

Our nation’s biggest supermarket chain

The Kroger Co. (NYSE:KR) has a market cap of $19.5 billion. The Kroger Co. (NYSE:KR) too has bought back shares in recent years, reducing its diluted shares outstanding by 15.8% between 2010 and 2012.

The company currently pays a 1.6% dividend with a low payout ratio of 18%. The Kroger Co. (NYSE:KR) started paying a dividend in 2006, and since then has grown distributions at a CAGR of 12.7%.

The company recently expanded its store count in southeastern and mid-Atlantic states through an acquisition of Harris Teeter. The Kroger Co. (NYSE:KR) paid $2.44 billion in exchange for 212 stores that are in fairly good shape.

Foolish final take

Supermarkets are businesses with notoriously low margins. All three of these supermarket chains face intense competition. In addition to having to compete with the likes of Wal-Mart Stores, Inc. (NYSE:WMT), Amazon is trying to dominate the grocery market as well.

Of these three companies SUPERVALU INC. (NYSE:SVU) seems like the worst investment by far. Its profits are non-existent and its balance sheet is weak. Perhaps new management may be able to breathe some life into this company, but I wouldn’t bet on it.

Then there’s Safeway and The Kroger Co. (NYSE:KR). Neither of these companies is likely to be a multi-bagger in the near future, but both company’s are solid profit producers nonetheless.

Personally, I like Safeway Inc. (NYSE:SWY) more. Its dividend is the more attractive of the two and it is much cheaper on a price to book basis. Finally, while Kroger hasn’t been stingy about buying back its own shares in recent years, Safeway has been better.

The article Do These Stocks Belong on Your Grocery List? originally appeared on Fool.com and is written by Ryan Palmer.

Ryan Palmer has no position in any stocks mentioned. The Motley Fool owns shares of Supervalu. Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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