Most income-based investors use a strategy involving purchasing shares on or before the company's ex-dividend date. On the ex-dividend date, the person who owns the security will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend. That said I wanted to not only consider these two companies from an ex-dividend perspective, but demonstrate how both companies also outpace their competition in terms of returns on assets and equity.
Family Dollar Stores (FDO), which closed trading on Tuesday at $63.07/share, will be going ex-dividend at the close of trading on Wednesday, September 12th. The Matthews, North Carolina-based firm, which currently yields 1.30% ($0.84), operates a chain of self-service retail discount stores primarily for low and middle income consumers in the United States. The company offers consumables, including household chemicals, paper products, food products, health and beauty aids, hardware and automotive supplies, and pet food and supplies; and home products comprising domestics, which include blankets, sheets, and towels, as well as house wares, giftware products, and home decor products. It also provides apparel products accessories, which consist of men's and women's clothing products, boys and girls clothing products, infants clothing products, shoes, and fashion accessories; and seasonal and electronics products, such as toys, stationery and school supplies, seasonal goods, and personal electronics, including pre-paid cellular phones and services.
In terms of FDO, there is one primary catalyst that potential income investors should find attractive and that is the company's returns on assets and equity when compared to some of its direct industry competitors. In the last 12 months, FDO has demonstrated a return on assets of 13.69% and a return on equity of 33.76%, whereas Dollar General (DG) has only managed to demonstrate a return on assets of 10.13% and a return on equity of 19.41%. It should be noted that FDO's return on assets outpaces DG's by a margin of 1.35 to 1, and also outpace DG's return on equity by a margin of 1.73 to 1.
GNC Holding Corp. (GNC), which closed trading on Tuesday at $40.11/share, will be going ex-dividend at the close of trading on Wednesday, September 12th. The Pittsburgh, Pennsylvania-based firm, operates as a specialty retailer of health and wellness products. Its products include vitamins, minerals, and herbal supplement products, as well as sports nutrition and diet products. The company sells its products under its GNC proprietary brands, including Mega Men, Ultra Mega, GNC Total Lean, Pro Performance, and Pro Performance AMP, as well as under third-party brands. As of December 31, 2011, it had approximately 7,600 locations, including approximately 5,900 retail locations in the United States comprising of 924 franchises and 2,125 Rite Aid franchise store-within-a-store locations; and franchise operations in 53 countries. GNC Holdings, Inc. sells its products through company-owned domestic retail stores, domestic and international franchise activities, third-party contract manufacturing, e-commerce, and corporate partnerships.
In terms of GNC, there is one primary catalyst that potential income investors should find attractive and that is the company's returns on assets and equity when compared to some of its direct industry competitors. In the last 12 months, GNC has demonstrated a return on assets of 9.71% and a return on equity of 21.85%, whereas CVS Caremark (CVS) has only managed to demonstrate a return on assets of 6.34% and a return on equity of 9.73%. It should be noted that GNC's return on assets outpaces that of CVS by a margin of 1.53 to 1, and also outpace DG's return on equity by a margin of 2.24 to 1.
Potential investors looking to establish a position in FDO or GNC should do so with a small to moderate position and add to that position as dividend announcements approach. Although the primary attraction comes in the form of dividend yield for both companies, one of the more important secondary catalysts to consider will be monthly same store sales and how they compare to both previous months and the same month in previous years.