Are Dollar Generals a Good Investment?
Final value of rented properties with Triple-Net is determined in much the same way as the value of any other property. The decisive factors for the value of the property are the location, the neighboring properties’ value, and what is the condition of the chosen building. Further factors influencing the value of the properties are such things as easements and restrictions that affect what acts and changes the owner can and cannot do on his own, without the prior consent of a tenant. Keep in mind that this type of net lease is long-term in mist cases.
Dollar General Corporation, a discount retail chain, provides a variety of merchandise throughout the South, Southwest, Midwest, and East of the United States. The company offers products:
– paper and hygiene products such as paper towels, sanitary napkins, paper utensils, trash and shopping bags, and laundry products
– ready-to-eat foods, cereals, canned soups and vegetables, seasonings, spices, sugar and flour
– perishable foods, milk, eggs, bread, chilled and frozen food, beer and wine
– snacks such as candy, cookies, crackers, salty snacks and sodas – medical and beauty products, including over-the-counter medicines and personal care products such as soaps, body washes, shampoos, cosmetics, and dental care products and foot care
– household items and pet food
– Tobacco – Seasonal items such as leisure products, toys, batteries, small electronics, greeting cards, stationery, disposable phones and accessories, garden supplies, hardware, automotive products, and home stationery
– household goods, including kitchen utensils, dishes, small appliances, light bulbs, storage containers, boxes, candles, household goods and kitchen utensils, as well as bedding and bathroom accessories
– clothing that includes casual wear for newborns, toddlers, girls, boys, women and men, as well as socks, underwear, disposable diapers, shoes and accessories.
The company has 4 main segments:
– Consumables (consumer). The leading segment includes cleaning products, health and beauty products, snacks, perishables, packaged food and household items, and food products.
– Seasonal (seasonal goods). Consists of prepaid phones and accessories, small electronics, batteries, toys, greeting cards, hardware, decorative materials, gardening supplies, stationery and home office supplies.
– Home products (goods for the home). Includes kitchen utensils, candles, small appliances, light bulbs, dishes, coasters, craft supplies, bed and bath items, and storage containers.
– Apparel (clothes). Offers casual wear for babies, children, girls, boys, women and men, as well as socks, intimate wear, disposable diapers, accessories and shoes.
Thus, Dollar General sells all kinds of merchandise, from toys and light bulbs to clothes and shampoos. The key difference from opponents – extremely low prices.
Arguments in favor of the company
– Management stated that changes in consumer behavior due to the coronavirus pandemic had a positive impact on the company’s results of operations.
– the company’s commitment to better pricing, cost reduction, private label product offerings, effective inventory management, and its operating strategies should drive sales growth and increase margins
– In case of economic shocks, this is a good option. When the economic crisis, consumer activity changes. Most consumers are cutting back on spending on “indulgence” and prioritizing essentials at discounted prices. When there is a crisis, these stores become more popular than usual.
– If you look at the map of the company’s stores, you can see that a huge share there is occupied by the southern states, whose level of wealth is lower than in the north, which may explain the steady growth in Dollar General’s revenue.
Triple Net Lease Risks
Of course, as in any business, there are also some risks when choosing triple net lease investments. The property owner must remember about such issues as interest rate risk, as well as credit or bankruptcy risk. Another thing that can have a negative impact on the income is a jump of interest rates during refinancing.
Credit or bankruptcy risk exists even with a good tenant due to the long-term nature of triple-net leases, more than enough time for economic or market conditions to change to the point where a once-profitable business goes bankrupt. In addition, at the end of a triple-net lease, the process of reconfiguring and re-letting the property can potentially be time-consuming and costly.
Why choose Dollar Generals
Shares of the American retailer Dollar General immediately soared 17.46% to $229.45 per share. As of 18:14, the shares have partially lost growth, reaching $219.17. This is evidenced by trading data on the New York Stock Exchange.
Quotes began to rise after the publication of Dollar General’s operating results for the first quarter of the 2022 financial year, which ended on April 29. The retailer’s net sales increased by 4.17% to $8.75 billion from $8.4 billion in the same quarter of 2021. Net income was $552.6 million, down 18.46% from $677.7 million a year earlier. The Board of Directors of Dollar General declared a quarterly cash dividend of $0.55 per share.
Last quarter, Dollar General’s sales increased by 9% YoY to $9.4 billion, while the company was 35% above the level of sales in the second quarter of pre-pandemic 2019. Following the release of strong quarterly results, Dollar General’s management raised its full-year guidance again, with revenue for the current year up 11% and like-for-like sales up 4-4.5%
Dollar General also continues shareholder cashback programs. In the second quarter, the company repurchased $349 million worth of shares and declared a quarterly cash dividend of $0.55 per share, which is about 1% of the annual return. The Board of Directors also increased the buyback program by another $2 billion.
Dollar General is always a Prime NNN Investment choice
You can be new in this sphere or a seasoned CRE investor – the outcome is always the same. Evaluating all the pros and cons, one can be sure that sinking money into Dollar General properties is your low-risk chance, stable and profitable, to experience all the benefits of a triple net lease and earn good money. When choosing this company – Dollar General-, you get guaranteed monthly income with rent escalations for decades; you do not need to be involved deeply in maintenance and can live your life feeling free. Overall, purchasing a Dollar General property meets the highest criteria.