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Grocery chain operator SuperValu is one of the most hated stocks on the market. Shares are down 85 per cent in the last five years.The company just filed its 10-K. JP Morgan’s Ken Goldman thumbed through the report and identified a couple of new nuggets.
From Goldman’s note:
Dividend at risk? The company added a risk disclosure under the substantial indebtedness section, noting that its high levels of debt could, “in combination with recent reductions to the book value of the company’s stockholders’ equity on the company’s balance sheet and its associated surplus under Delaware law, require consideration of additional factors prior to repurchasing stock or paying dividends.” We continue to believe that should operations fail to improve this year or potentially further deteriorate, the dividend could be at risk. However, we still think this is unlikely. As we have previously stated, we do not think a dividend cut would be the worst thing for the stock, as we believe that 1) most investors are not in this story for the dividend; 2) a potential dividend cut would not surprise investors, and may already be somewhat baked into the stock price; and 3) SVU could better allocate this capital towards improving operations and/or paying down debt. Clearly it would not be a positive, either.
SuperValu operates the Acme, Albertson’s and Shop N’ Save banners. JP Morgan has an overweight rating and an $11 price target on the stock.
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