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SUPERVALU INC. (SVU)’s Fall From High-Dividend Grace

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Once a company becomes a member of the elite Dividend Aristocrats list, it takes a lot to dislodge that company from its ranks. After all, having demonstrated a 25-year history of raising dividends even through the ups and downs of the economy, companies don’t want to give up the hard-earned distinction without a fight. Unfortunately, though, sometimes losing Dividend Aristocrat status is unavoidable, and SUPERVALU INC. (NYSE:SVU) marks a good example of what can happen to derail a company’s dividend success.


SUPERVALU INC. (NYSE:SVU) is the company behind the Cub Foods, Farm Fresh, and Shop ‘n Save grocery store chains, as well as its Save-A-Lot discount grocery chain. For years, SUPERVALU INC. (NYSE:SVU) was able to raise its dividends consistently even as it faced the pressures of low margins and rising competition that plague the entire grocery industry. Let’s take a closer look at SUPERVALU INC. (NYSE:SVU) to see what happened to force it to cut its dividends and abandon its status as a Dividend Aristocrat.

Dividend Stats on SUPERVALU

Last Dividend $0.0875, May 2012
Dividend Before 2010 Cut $0.175
Number of Consecutive Years With Dividend Increases Before 2010 Dividend Cut 35 years
Last Increase Before 2010 Cut August 2009, 1.4% increase

Source: Yahoo! Finance. Last dividend and increase refer to ex-dividend date.

What happened to SUPERVALU?
For dividend investors, the end of the line for SUPERVALU came just a year ago, when the company said it would suspend its dividend as part of a broader effort to conserve cash and implement major turnaround initiatives such as price cuts, operational cost-cutting, and potential debt restructuring. In the end, the company sold off some of its best known grocery chains, including Albertson’s, Jewel-Osco, and Shaw’s, to private-equity company Cerberus Capital earlier this year, retaining its core operations as a much smaller company moving forward.

But the seeds of SUPERVALU INC. (NYSE:SVU)’s dividend woes had been sown much earlier. Traditional grocery store chains found themselves under huge amounts of pressure during the 2008 recession, as they were stuck in the middle of two competing trends. On one hand, Whole Foods Market, Inc. (NASDAQ:WFM) had used its dominance in the organic and health-food segment to produce a much higher-margin business than SUPERVALU INC. (NYSE:SVU) and other traditional grocery chains could earn. At the other end of the spectrum, though, increased competition from grocery offerings from Wal-Mart Stores, Inc. (NYSE:WMT) and other discount retailers prevented SUPERVALU and its peers from competing against Whole Foods Market, Inc. (NASDAQ:WFM) purely on price.

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