What Does Dollar General’s Bid for Family Dollar Mean for the Dividend Aristocrats?

I woke up this morning to news that Dollar General (DG) had made a competing offer for Dividend Aristocrat Family Dollar (FDO) in response to Dollar Tree’s (DLTR) offer on July 28th.  Dollar General is offering $9.7 billion for Family Dollar, about 14% more than Dollar Tree’s $8.5 billion offer.  Unlike Dollar Tree’s mixed cash and stock offer, Dollar General is offering $78.50 in cash for each share of Family Dollar.

Will Dollar General Become the Latest Dividend Aristocrat?

Dollar General first started trading on November 18, 2009 and, like Dollar Tree, has never paid a regular dividend.  As I mentioned in my post when Dollar Tree made their offer, S&P is likely to allow an acquiring company to inherit Family Dollar’s status as a Dividend Aristocrat, but as soon as the dividend fails to increase year-over-year that company will fall off the list of S&P Dividend Aristocrats.  In their 2013 annual report, Dollar General does not indicate one way or the other whether they will pay dividends in the future.  So it seems likely that, regardless of who wins the bidding for Family Dollar, one company will be eliminated from the current list of 54 S&P Dividend Aristocrats.

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