Not So “Whole” Foods (WFMI)
Whole Foods (WFMI) is starting to intrigue the value players on Wall Street (and us) with its current 3.52% dividend yield. Unfortunately, the reason for the high yield is that the company’s stock price has declined so rapidly, closing trading on Thursday afternoon at $22.71.
Whole Foods’ stock price is down over 45% this year, and is far off its all-time high of $77 it set in December of 2005. The company has seen its niche organic products line come under attack from competing grocers who are now stocking organic foods themselves. The cost factor of paying more for better quality is hurting the company as well, given the recent economic slowdown.
Whole Foods is hoping to reap some rewards next year of its pricey acquisition of the Wild Oats chain, which essentially removed their main competitor from the market. Expansion plans are still in place for 51 stores this year, which would be up from 34 stores two years ago. Such aggressive expansion plans are probably another reason for Whole Foods’ stock price decline. If the company decides to pull back on those expansion plans, they may be able to address the falling stock price with a buyback, and then hopefully a dividend increase. In short, WFMI is beginning to look more attractive at these current levels, but investors should probably just browse the aisles for now and wait for a catalyst to turn Whole Foods’ fortunes around.
Whole Foods (WFMI) is not recommended at this time, and currently holds a Dividend.com rating of 2.8 out of 5 stars.
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