Retail entities Dollar General (NYSE: NYSE:DG) and Realty Income (NYSE: NYSE:O) have faced significant share declines over the past year due to unique challenges, despite operating in different retail segments.
Dollar General, a conventional retailer, is dealing with issues such as shifts in consumer behavior towards lower-margin consumables and away from higher-margin items. This shift has caused earnings to drop from $3 to $2.14 per share in Q2 2023. Additionally, customers are cutting back on excess spending. The company is also grappling with internal management issues and a tarnished reputation, being labeled as the "worst retail job in America" by Bloomberg. These factors contributed to the firing and rehiring of its CEO, marking a redo of the transition process, which led to an over 50% drop in its stock over the past year.
On the other hand, Realty Income, a net-lease REIT with over 13,000 predominantly single-tenant retail assets, experienced a 23% stock decline due to rising interest rates and business headwinds. Despite these challenges, the company has managed to maintain steady growth. In H1 2023, Realty Income saw a marginal rise in its adjusted funds from operations (FFO) to $1.98 per share from $1.94 in H1 2022. The company has also consistently increased its unique monthly-pay dividend annually for 29 years at a compound annual growth rate (CAGR) of 4.4%. As part of its growth strategy, Realty Income plans to acquire Spirit Realty and offers a decade-high dividend yield of 6.4%.
The comparison between these companies underscores the role of an investor's risk tolerance and their preference for either turnaround situations or entities demonstrating steady growth. Despite the challenges, Realty Income appears to be a more stable choice for long-term dividend investors due to its steady performance and high dividend yield, while Dollar General's future remains uncertain with its turnaround story just beginning and high risk involved.
InvestingPro Insights
InvestingPro's real-time data and tips offer some valuable insights into the performance and potential of Dollar General and Realty Income.
For Dollar General, InvestingPro data indicates a market cap of $25.77 billion, a P/E ratio of 11.96, and a revenue growth of 9.79% in the last twelve months as of Q2 2024. The company's price has fallen significantly over the last year, which aligns with the article's mention of a 50% drop in stock. Despite this, the company yields high returns on invested capital and has raised its dividend for five consecutive years, as per InvestingPro Tips.
Realty Income, on the other hand, has a market cap of $35.55 billion, a higher P/E ratio of 37.32, and a substantial revenue growth of 32.32% in the last twelve months as of Q2 2023. The company's stock has declined over the past year, but it has maintained dividend payments for 30 consecutive years and has impressive gross profit margins, according to InvestingPro Tips.
These insights can provide additional context for investors. For more comprehensive data and tips, consider exploring the InvestingPro platform, which offers an extensive list of 15 additional tips for Dollar General and 11 for Realty Income.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.