Weis Markets: A Safe and Steady Grocery Chain with a Long History of Dividend Payments and Conservative Financial Practices.

Weis Markets is a safe and boring grocer with a long history of paying dividends and a clean balance sheet. The company has nearly $170 million in high-grade bonds and commercial paper. It prioritizes stability and steady growth, making it a reliable option for investors seeking a low-risk investment.

Weis Markets (NYSE: WMK), a longstanding grocery chain with a strong presence in the Mid-Atlantic region, is often characterized as a safe and stable investment. With a clean balance sheet, a history of dividend payments, and nearly $170 million in high-grade bonds and commercial paper, Weis Markets prioritizes stability and steady growth. This approach has resulted in consistent performance over the past decade, with Weis shares outperforming many competitors, albeit lagging behind the broader market.

The company's strategy of organic growth and strategic acquisitions has led to a modest increase in revenue over the past twelve years, averaging mid-single-digit growth annually. Weis Markets has made several acquisitions in the last decade, such as Sunnyway Foods, to consolidate smaller players in its familiar markets. Despite these acquisitions, Weis Markets has been cautious in its expansion, focusing on same-store sales growth.

Recent financial data indicates that Weis Markets' same-store sales have shown modest growth, with a year-over-year increase of 0.9% in Q1 FY 2025, but this growth has slowed due to challenging comparisons. However, the company's pharmacy segment and its fuel sales have shown promising growth, with the pharmacy segment growing at 4.8% year-over-year in the same period.

Weis Markets' conservative approach to capital allocation is evident in its dividend policy. The company pays quarterly dividends of $0.34 per share, with a yield of 1.75%. Despite generating significant free cash flow, Weis Markets has been cautious in increasing its dividends, with a dividend growth rate of only 1.5% over the last decade. This cautious approach may be a reason why the stock does not receive much love from minority shareholders, with a total annual return to shareholders of just 1.75%.

Looking ahead, analysts expect Weis Markets to continue its stable trajectory in Q2 FY 2025, with modest organic revenue growth. The company's return on investments should remain higher than that of its grocery operations, with dividends likely to remain flat year-over-year.

In conclusion, Weis Markets is a reliable option for investors seeking a low-risk investment in the grocery sector. Its focus on stability, steady growth, and a clean balance sheet makes it an attractive choice for those who prioritize income and capital preservation over aggressive growth.

References:
[1] https://seekingalpha.com/article/4803995-weis-markets-safe-boring-and-priced-for-what-it-is