The Kroger Co. (KR): Among the Best Retail Dividend Stocks to Buy

We recently published a list of the 11 Best Retail Dividend Stocks to Buy. In this article, we are going to take a look at where The Kroger Co. (NYSE:KR) stands against other best retail dividend stocks.

The retail industry has been undergoing a digital transformation since the COVID-19 pandemic. The industry has shifted from a broad, supply-driven model to a more data-focused, ultra-personalized approach adjusted according to individual customers. However, the transition was challenging due to elevated costs and the complexities of existing business models and legacy systems.

According to a report by Deloitte, the industry has experienced slow growth in recent years, with a compound annual growth rate ranging between 1.5% and 3.5%, depending on the sub-sectors. Profit margins also remained under pressure because of consumers’ expectations for seamless omnichannel experiences. Digital adaption was needed, but the costs associated with it created a growing hunger for retailers to increase efficiency, establish strategic partnerships, and investigate alternative revenue streams to remain relevant and competitive.

As retailers strive to improve operations with limited resources, technology and automation have emerged as promising solutions. Generative artificial intelligence, in particular, has moved beyond initial hype and is generating measurable benefits. According to Deloitte, retailers that integrated AI-powered chatbots during Black Friday experienced a 15% improvement in conversion rates. The report also mentioned that six in ten retail buyers reported that AI-enhanced tools improved demand forecasting and inventory management in 2024. Digital efficiency has become a priority, and 2025 could mark a turning point for advancements in several fields, including merchandising, supply chain management, and marketing. Notably, seven in ten retail executives expect to implement AI capabilities within the year to enhance personalization efforts.

Consumer spending in February grew at a slower pace than expected. However, underlying data suggested that sales were strong despite concerns about economic slowdown and high inflation. The report was released during high uncertainty over economic growth, especially as President Donald Trump’s policies led to surging tariff disputes with important US trading partners. Economists have shown their concerns that these tariffs could contribute to higher inflation and weaken economic momentum. Retail sales for February rose by 0.2%, rebounding from the previous month’s downwardly revised 1.2% decline but missing the Dow Jones estimate of a 0.6% increase, as per preliminary data from the Commerce Department. The data also highlighted that retail sales climbed 0.3%, excluding auto sales, which aligned with market expectations.

According to the report, online spending played a key role in driving sales growth for the month, as nonstore retailers reported a 2.4% growth. In addition, health and personal care sales also experienced a 1.7% hike, while the food and beverage sectors saw a 0.4% growth. On the whole, retail sales grew 3.1% as compared to the same period last year, outperforming the 2.8% inflation rate measured by the consumer price index.

The retail sector has largely stabilized since the pandemic, making it an investment area worth considering. Investors are gravitating toward this sector, aiming to capitalize on growing consumer demand. Moreover, the sector is known for its history of providing dividend payments to shareholders. According to a report by Janus Henderson, the general retail sector distributed $8.4 billion in dividends in the third quarter of 2024, up significantly from $2.8 billion paid during the same period in 2020.

Our Methodology

For this article, we scanned Insider Monkey’s database of over 1,000 hedge funds as of Q4 2024 and picked companies that operate in the retail industry. These companies sell goods and services directly to consumers for personal use and operate through physical stores, online platforms, or a combination of both. From that list, we picked 11 stocks with the highest number of hedge fund investors and ranked them in ascending order of the hedge funds’ sentiment towards them.

At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

The Kroger Co. (NYSE:KR)

Number of Hedge Fund Holders: 60

The Kroger Co. (NYSE:KR) is an American retail company that operates a network of supermarkets and multi-department stores across the US. The company operates over 2,700 supermarkets under multiple grocery brands. An important aspect of its strategy is its varied retail format, which incorporates pharmacies and fuel centers in numerous locations. This approach enables the company to attract a wide range of customers while minimizing reliance on a single revenue source. The stock is generating solid returns in 2025, surging by over 7% so far this year, while its 12-month return came in at over 17%.

In the fourth quarter of 2024, The Kroger Co. (NYSE:KR) reported revenue of $34.3 billion, which declined by 7% from the same period last year. The revenue also missed analysts’ estimates of $34.7 billion. The company’s operating profit also dropped by over 27% on a YoY basis. However, its Alternative Profit Businesses, encompassing advertising and data services, generated $1.35 billion in operating profit, driven by a 17% increase in media-related revenue. Digital sales saw an 11% uptick, highlighting ongoing initiatives to enhance the customer experience. Additionally, the launch of over 900 new products under the “Our Brands” portfolio emphasized its commitment to expanding private-label offerings to boost profitability.

The Kroger Co. (NYSE:KR)’s cash position came in strong, which makes it a reliable dividend payer. In FY24, the company reported an operating cash flow of $5.8 billion. Over the year, the company distributed $883 million worth of dividends to shareholders. Its quarterly dividend comes in at $0.32 per share for a dividend yield of 1.92%, as of March 29. KR is one of the best dividend stocks on our list as the company maintains an 18-year streak of consistent dividend growth.

Overall, KR ranks 6th on our list of the best retail dividend stocks to buy. While we acknowledge the potential of KR as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than KR but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.

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Disclosure: None. This article is originally published at Insider Monkey.