This Dividend Stock Could Regain Momentum After a Big Acquistion

Empire Company (TSX:EMP.A) stock rose 2.19% on September 25.

Shares were boosted after news hit that Empire would acquire the food retailer Farm Boy for $800 million. Empire will aim to accelerate growth at Farm Boy and expressed its desire to double its stores across Ontario over the next five years. Empire will do this through new store openings and by converting some existing Sobey’s locations.

Competition between grocery retails has grown increasingly fierce in the last several years. Many top retailer stocks were hit after announced its acquisition of Whole Foods.

Ontario grocery retailers have also been forced to absorb higher costs after minimum wage was raised to $14/hour in January 2018. Industry leaders have warned that food prices will begin to accelerate at a faster pace as stores look to keep pace in a challenging environment.

Empire released its fiscal 2019 first-quarter results on September 13. Same-store sales excluding fuel were up 1.3% year-over-year and the company reported adjusted earnings per share of $0.37 per share compared to $0.32 in the prior year.

Margins at Empire were “lower than we would have liked” according to President and CEO Michael Medline. However, he assured shareholders that the company would push to recover from cost pressures. Rising food prices is one of the options available to Empire and other retailers going forward.

The board of directors also declared a quarterly dividend of $0.11 per share representing a modest 1.3% dividend yield.