Why SUPERVALU Has Crashed in 2012

SUPERVALU (NYSE: SVU  ) shareholders (like Austin) had better hope there is an exception to the phrase "history doesn't repeat itself." This has been an ugly year for the grocery chain, falling around 40% in 2012 while the Dow Jones Industrials Average (INDEX: ^DJI  ) has climbed above 5%. While comparing an index of solid blue chips to a volatile turnaround grocer seems unfair, it highlights the opportunity costs investors are missing when they make a bet on a long-shot flyer like SUPERVALU.

The weakness this year can be attributed to three major factors: losses, debt, and same-store-sales, all of which are in the wrong place. The company has been losing money for some time now, has an enormous debt burden taken on with the 2007 acquisition of Albertson's, and has had weak same-store-sales for numerous quarters.

For all the difficulties facing the company, though, Austin thinks the future is rosy. Pressures remain, but many of the crucial levers for a big turnaround are being pulled, and big writedowns disguise an otherwise respectable performance by the company. Investing in SUPERVALU certainty isn't for the faint of heart, but with that 7% dividend you can get paid to wait while the story plays out.

As high as SUPERVALU's dividend is, though, this is a turnaround story, not a steady income stock. If you're craving big, safe dividends for your portfolio, look elsewhere. You can start with The Motley Fool's special free report outlining our nine top dependable dividend-paying stocks. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your complimentary copy today at no cost! Just click here to discover the winners we've picked.

Austin Smith owns shares of SUPERVALU. The Motley Fool owns shares of Costco and SUPERVALU. Motley Fool newsletter services recommend Costco. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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