It May Be a Good Time to Buy The Kroger Co. (KR). Here’s Why

Kroger pays you best
Perhaps most important to investors, though, is the simple fact that out of the three supermarket stocks discussed above, Kroger is the firm generating the most cash from its business — by far — and The Kroger Co. (NYSE:KR) stock gives you the biggest free cash flow bang for the buck.

Measured by dividing a firm’s market capitalization (the price you pay for Kroger stock) into its free cash flow (the money your investment generates for you), Kroger offers investors quite simply the best “free cash flow yield” of the three firms named. Put even more simply, for every $1 you invest in a share of Kroger stock today, you can expect the firm to generate 4.2 cents’ worth of real, cash profits on your investment.

KR Free Cash Flow Yield data by YCharts.

Kroger may ultimately use this cash to pay you bigger dividends (it already pays a 1.8% dividend — 37% better than Harris Teeter Supermarkets Inc (NYSE:HTSI)’s divvy, and The Fresh Market Inc (NASDAQ:TFM) pays no dividend at all!). Or Kroger could use its cash to buy back shares (increasing the size of your stake in the company for every share it takes off the table), or to reinvest in its business and shore up its lead over the would-be up-and-comers. Any way you look at it, though, The Kroger Co. (NYSE:KR)’s ability to generate cash offers investors a great reason to invest.

And that, Fools, is the reason I think now’s a great time to buy Kroger stock.

The article It May Be a Good Time to Buy Kroger Stock. Here’s Why originally appeared on Fool.com.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends The Fresh Market Inc (NASDAQ:TFM)and Whole Foods Market, Inc. (NASDAQ:WFM). The Motley Fool owns shares of Whole Foods Market, Inc. (NASDAQ:WFM).

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