Dollar General Morphs Into The Next Great Dividend Growth Play

The retail sector is an extremely competitive space with relative few barriers to entry. In order for a company to establish a moat, significant resources need to be invested into what I would term a "category killer". The most obvious example is Wal-mart (NYSE: WMT) which is synonymous with low price goods. I believe Dollar General (NYSE: DG) is positioning itself quite nicely with its large foot print along with a broad assortment of low priced items. The article below will detail my investment thesis concerning DG. Establishing Dollar General's Moat DG is one of the largest competitors in the dollar store concept. The stores tend to fall in the 20,000 square foot range and tend to be clustered in the middle to lower income areas. The small format allows for multiple units with minimal overhead that allows for a much greater emphasis on keeping prices low. DG currently operates over 13,000 stores with plans for increasing store by 7% annually over the next two years. The management team at DG has indicated they foresee an additional opportunity for 13k additional units which would virtually double its store footprint before the market becomes saturated. By virtue of its extensive and ever expanding footprint, I view DG along with its rival Dollar Tree (Nasdaq: DLTR), the undisputed leaders in the space. With DLTR expected to consume Family Dollar (NYSE: FDO) this year, the remaining entities will have a virtual duopoly in the space an enviable position to have. A large... Read more