Will Family Dollar Help You Retire Rich?http://www.fool.com/retirement/general/2012/10/04/will-family-dollar-help-you-retire-rich.aspx Dan Caplinger
October 4, 2012
Now more than ever, a comfortable retirement depends on secure, stable investments. Unfortunately, the right stocks for retirement won't just fall into your lap. In this series, I look at 10 measures to show what makes a great retirement-oriented stock.
Everybody likes to save money, but during the recession a few years ago, it became a necessity for millions of Americans. Even low-end retailers found themselves struggling to keep cash-strapped customers coming into the stores. But for Family Dollar (NYSE: FDO ) , the weak economic environment was perfectly aligned with its business model of catering to deep-discount shoppers. If the recovery is for real, though, can the dollar-store giant keep its gains? Below, we'll revisit how Family Dollar does on our 10-point scale.
The right stocks for retirees
Sure, you still want good returns, but you also need to manage your risk and protect yourself against bear markets, which can maul your finances at the worst possible time. The right stocks combine both of these elements in a single investment.
When scrutinizing a stock, retirees should look for:
With those factors in mind, let's take a closer look at Family Dollar.
Source: S&P Capital IQ. Total score = number of passes.
Since we looked at Family Dollar last year, the company has had its score plunge by three points. A drop in free cash flow as well as slowing dividend growth and richer valuations caused the drop, even as the stock posted an impressive 30% gain over the past year.
Dollar stores have come a long way in recent years. During the worst of the recession, Family Dollar, Dollar Tree (Nasdaq: DLTR ) , Dollar General (NYSE: DG ) , and a host of other deep-discount retailers blossomed as consumers sought ways to move down to the lowest price points possible. Even Wal-Mart (NYSE: WMT ) , the perennial discount retailer, saw customer defections at the hands of Family Dollar an