Investors will undoubtedly remember notable stock market crashes that occurred in October. These include sharp downturns in 1929 and 1987.
Although the month is coming to a close for this year, a market swoon will happen at some point. It could even be next month as investors are on edge about a few things, like the Iran war, high energy prices, and increasing interest rates. If you’re worried about a market crash, it can help to focus more on the long term. If you own shares of dividend-paying stocks of companies that hold up well during sharp economic and stock market downturns, you can be less concerned about short-term economic swings. Among those companies, Kroger (KR -1.67%) certainly stands out.
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People always need food
Kroger, in existence for 143 years, is a very large supermarket retailer with more than 2,700 stores. It sells necessities and, with an outsize presence, produces steady results in all kinds of economic times.
In the current situation, consumers are being squeezed by higher prices, but Kroger has held up relatively well compared to other retailers.
The company’s second-quarter same-store sales (comps) increased 0.2% after excluding volatile gasoline sales. While that’s not a great sales result, there were extenuating circumstances, like a Cyclospora outbreak hurting produce sales, falling egg prices, and pharmacy sales hurt by a law allowing Medicare to negotiate drug prices. These factors were all out of Kroger’s control.
But even with all that, I like the company for investors. While Kroger may not produce fast growth, it does have steady sales increases. For the year, management expects comps to grow 0.2% to 0.8%.
KR Kroger
$65.66-$1.12 (-1.67%)
NYSE · As of 1:49 PM ET 10/27/26
Sticking to its commitment
Management had laid out capital-allocation priorities that include investing in the business, maintaining the company’s investment-grade rating, and increasing dividends over time.
Earlier this year, the board of directors approved an impressive 11.4% hike to its quarterly dividend rate to $0.39 per share. That made it 20 years with an increase. It’s certainly good to see Kroger recommit to dividends. The company had curtailed payouts in 1988 before resuming them in 2006.
Of course, a commitment without the means to back it up wouldn’t mean much. Fortunately, Kroger has the earnings to support the payouts. The company’s payout ratio, or dividends compared to earnings, stands at 78%.
Shareholders will also appreciate the market-beating dividend yield. Kroger’s stock has a dividend yield of 2.3%, which is more than double the S&P 500 index’s 1.1%.
Consumer staples companies, such as supermarkets, hold up better during difficult economic times because demand for necessities doesn’t dip. Hence, if the overall stock market fell sharply, investors would undoubtedly clamor for Kroger’s shares.
With a better-than-market dividend yield and a history of increases, Kroger should hold up well compared to other, more economically sensitive stocks, and I think investors would sleep better owning it in a market crash.
