The news is that Family Dollar is hiking its dividend to $0.21 from $0.18 per share per quarter.  The gain is a 16% hike and this has Family Dollar shares higher by 2.8% at $55.25.  This will take the 1.3% yield indication on the financial screens up to a better yield of about 1.5% for dividend investors.

It may not seem like a high yield, but the company has now claimed to have raised its dividend each year at a compound average rate of approximately 16%.

Dollar stores of today are really stores that sell items under $10.00 in most cases.  Family Dollar pays a dividend, while Dollar Tree and Dollar General Corporation (NYSE: DG) do not.

JON C. OGG

Apple Inc. (NASDAQ: AAPL) hit a new high this morning ahead of next week’s earnings.  The new value is almost at $400 billion.  The new high is $428.50 for now and the consensus price target from Thomson Reuters is now above $509.00.

Dollar Tree, Inc. (NASDAQ: DLTR) is continuing with the trade-down economy and the secular growth of the dollar store (actually sub-$10) stores.  The new high is $85.58 and the consensus price target is $86.27 from Thomson Reuters.  Dollar Tree is now worth more than $10 billion in market capitalization.

Ecolab Inc. (NYSE: ECL) is worth almost $14 billion now, and the new high today of $60.45 compares to a Thomson Reuters consensus price target of $61.56.

Read Also: Top 2012 Stock Picks From Major Gurus

McDonald’s Corporation (NYSE: MCD) gave solid same-store sales forecast and recently juiced up its dividend.  The new high is $101.87 and the market cap is nearing $104 billion.

Monster Beverage Corporation (NASDAQ: MNST) recently announced a stock split and shares hit a new high this morning but have promptly backed off by close to 2%.  The new high is $101.67 and the consensus analyst target is close to $105.00.  It is hard to imagine, but Monster now has a market value of almost $8.7 billion.

Nike Inc. (NYSE: NKE) keeps doing it.  A new high of $100.75 was put in today after a prior 52-week high of $99.44.  Its market value now eclipses $46 billion.

Panera Bread Company (NASDAQ: PNRA) is up at stratosphere levels now for its healthier sandwich and destination approach.  The new high is $151.93 and the consensus price target from Thomson Reuters is $146.68.  Its market cap is now almost $4.5 billion.

Read Also: DJIA Projected 12% Gains to 13,678 in 2012

Starbucks Corporation (NASDAQ: SBUX) has proven us very wrong on how high the valuation can go back up to.  The new high is $48.15 and the consensus price target from Thomson Reuters is just under $48.00 and the market cap is now more than $35 billion.

Advance Auto Parts Inc. (NYSE: AAP) worth over $5 billion, AutoZone, Inc. (NYSE: AZO) worth over $13 billion, and O’Reilly Automotive, Inc. (NASDAQ: ORLY) worth over $10 billion… These all hit record high prices in their stocks on Wednesday. With a record age car fleet in America of more than 10 years, car parts stores and suppliers sure are going to have a lot of car owners to sell parts to that are long past the warranty and insurance coverage.

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JON C. OGG

Several other standouts from today are as follows…

Zoll Medical Corp. (NASDAQ: ZOLL) is up nearly 23%, at $43.80. The medical equipment maker beat quarterly earnings estimates and announced a $50 million stock buyback program.

Angie’s List Inc. (NASDAQ: ANGI) is up more than 25%, at $16.32. The company had its IPO today, and shares have risen briskly from the $13 offering price.

Rambus Inc. (NASDAQ: RMBS) is up more than 23%, at $8.78. The company’s shares were torched yesterday following an adverse ruling in a patent case. Today’s comeback will help, though its a long ways back to the $18 level the stock was trading at yesterday morning.

Viasystems Group Inc. (NASDAQ: VIAS) is up more than 22%, at $18.25. The company withdrew a proposed offering of 4 million shares.

Daqo New Energy Corp. (NYSE: DQ) is down about -19%, at $1.82, after setting a new 52-week low earlier today. The company’s CFO will leave the company at the end of this month. Shares fell -3% early this week when the solar PV company missed earnings estimates.

Stay tuned for Friday. New York Federal Reserve Bank president William Dudley is speaking tomorrow morning and Dallas Federal Reserve Bank president Richard Fisher is speaking tomorrow afternoon. Here’s a list of other noteworthy events (all times Eastern):

• 10.00 a.m. – Conference Board index of leading economic indicators

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Paul Ausick

American Capital Agency (NASDAQ: AGNC) Cut to Market Perform at JMP Securities.
Apple Inc. (NASDAQ: AAPL) Reiterated Outperform with $500 target at Credit Suisse.
Archer Daniels Midland Company (NYSE: ADM) Started as Hold at Argus.
Cal-Maine Foods, Inc. (NASDAQ: CALM) named value stock of the day at Zacks.
Caterpillar Inc. (NYSE: CAT) Raised to Buy at Goldman Sachs.
Dollar Tree, Inc. (NASDAQ: DLTR) Cut to Equal-Weight at Barclays.
Family Dollar Stores, Inc. (NYSE: FDO) Raised to Overweight at Barclays.
Hewlett-Packard Co. (NYSE: HPQ) Reiterated Buy with $40 target at Argus.
Kirkland’s, Inc. (NASDAQ: KIRK) Cut to Underperform as bear of the day at Zacks.
Lincoln National Corporation (NYSE: LNC) Added to the U.S. 1 List at BofA/ML.
Monsanto Company (NYSE: MON) Reiterated Outperform as Bull of the Day at Zacks.
Navistar International Corp. (NYSE: NAV) Cut to Sell at Goldman Sachs.
Tiffany & Co. (NYSE: TIF) Started as Buy at Stern Agee.
Veeco Instruments Inc. (NASDAQ: VECO) Cut to Sell at Canaccord Genuity.

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JON C. OGG

24/7 Wall St. has been calling for higher and higher prices in the dollar store sector and we have discussed consolidation in the other discount store and close-out stores.  Dollar stores will be a secular winner over the years ahead unless we get a sudden return to a booming economy.  We have even gone as far as to showing that dollar store chains are now where Wal-Mart Stores Inc. (NYSE: WMT) was back in the early 1990s.  Private equity and other savvy investors like Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-A) have been active in this space. 

Dollar General Corporation (NYSE: DG) remains a Stock to Own for the Next Decade, but we are growing to accept the math here: shares hit a new all-time high of $39.22 today and the consensus price target is only $39.94.  We have chatted this one up over and over since the stock was well into the $20 stock handles.  Kohlberg Kravis Roberts & Co. (NYSE: KKR) continues to sell stock that it still owns and we would just expect that the firm will continue to sell shares.  It is when those price drops occur that you get your chance to enter the stock on the cheap.  Please be advised, we expect that Warren Buffett will have added to this position.

There has also been buyout interest in Family Dollar Stores Inc. (NYSE: FDO), up only marginally at $54.05 versus a 52-week range of $41.31 to $56.92.  Dollar Tree, Inc. (NASDAQ: DLTR) has also been under private equity interest and its shares are up 2% at $80.92 and its stock hit a new high of $80.99 this morning.  Analysts have consensus price targets of $56.87 for Family Dollar and $77.67 for Dollar Tree.

Big Lots Inc. (NYSE: BIG) is a close-out store with many low-priced items but is no dollar store.  There was a while where it was also considered takeover bait but that failed to materialize.  At $34.33, the 52-week range is $27.82 to $44.44.  Tuesday Morning Corp. (NASDAQ: TUES) is another close-out store and it is often overlooked because it has a mere $158 million market capitalization rate.  At $3.71 after a 2.6% drop today, its 52-week range is $3.22 to $5.93.

99 Cents only is up 4.2% at $21.36 this morning. The news and the reaction may seem anti-climactic, but this brings an end to what was a long and arduous buyout process that has been going on since at least March of this year.

The growth of discounters and the growth of dollar stores says something awful about America.  If these trends continue, it simply means we have more and more of the population at the lower-end of the spectrum seeking deals wherever they can be found.  Still, business is business.  If Warren Buffett and private equity giants have so much interest in this sector, ask yourself if there is money to be made. Again: Dollar Stores Are The Next Wal-Mart!

The sad thing is that there is now a market premium in the sector.  Our favorite remains Dollar General, but it now trades at 15-times 2012 (actually January 2013) fiscal earnings estimates from Thomson Reuters.  Another premium is there for Dollar Tree with a forward 2012 ratio of 17.5-times expected earnings.  Family Dollar has a different fiscal year-end (august) but if we blend the estimates we get a stock trading at close to 14-times the same earnings estimate periods of the peers.   

We will start to grow a bit more cautious on the sector of dollar stores if the price appreciates too much more.  The fact that we and others are excited about the dollar store and close-out store sector does not bode for much growth and does not bode well for the middle class.  These stocks now trade at richer multiples than many normal retailers: Macy’s Inc. (NYSE: M) trades at 9-times expected 2012 (January 2013) earnings estimates and Target Corporation (NYSE: TGT) trades at 12-times the same period’s estimates.  Wal-Mart Stores Inc. (NYSE: WMT) trades closer to 11-times next year’s expected earnings and that is after the stock enjoyed a significant pop of late.

For a comparison, 99 Cents Only at $22.00 per share values the company at about 17.5-times what was the expected 2012 (March 2013) fiscal earnings expectations.  This still leaves some room higher for dollar stores, but this is a premium to peers and to the broad market.  The secular trend is what is driving the value of dollar stores and investors are willing to pay a premium for that.  The questions will start to arise if these premiums grow much further.  How much of a premium can a discount sector command?

JON C. OGG

Wal-Mart Stores Inc. (NYSE: WMT) announced last month that it was re-instituting its layaway plan after a five-year break. Sears Holdings Corp. (NASDAQ: SHLD) Sears and Kmart stores, Target Corp. (NYSE: TGT), Best Buy Co. Inc. (NYSE: BBY), and The TJX Companies, Inc. (NYSE: TJX) TJ Maxx stores also offer layaway plans.

For many large retailers inventories have piled up and margins are threatened because retailers fear that they will have to take larger-than-planned markdowns to move their holiday inventory. Layaway plans at Kmart and Toys ‘R’ Us have helped boost sales through layaway programs, while Target has had success with a branded credit card that offers shoppers a 5% discount on items purchased at the store. Lowe’s Companies, Inc. (NYSE: LOW) has a similar discount credit card at its Lowe’s home improvement stores.

Some super-discounters like Dollar General Corp. (NYSE: DG) and Dollar Tree, Inc. (NASDAQ: DLTR) don’t offer layaway plans, but Family Dollar Stores, Inc. (NYSE: FDO) does.

There are even on-line layaway shops that offer everything from diamonds to fabrics. Payments are made by debiting customers’ bank accounts or by check.

Continuing high unemployment and stagnant wages are probably the biggest reason for the re-appearance of layaway plans. Credit tightening has left many consumers without access to credit cards or they prefer to conserve cash by avoiding high credit card interest rates. Many layaway plans include a small one-time fee for the service, but that’s always lower than 10%+ credit card interest rates.

The re-emergence of layaway plans reflects the desire for retailers to make it as easy as possible for every consumer to make a purchase and the desire among consumers to manage their own cash flows. The programs will last as long as consumer credit is expensive and hard to get, then they’ll fade away until the next time.

Paul Ausick

Dollar stores are yet again in the news on reports from the New York Post that 99 Cents Only Stores (NYSE: NDN) is soon to get a $22.00 to $24.00 buyout offer from the private equity outfit Apollo Global Management, LLC (NYSE: APO) to top a prior buyout offer from Leonard Green & Partners at about $19.09 earlier in the year.  This may be the rumor mill at work, but there are reasons that this is the case.  The trick here is that the founding family controls about one-third of 99 Cents Only and our understanding is that a new deal might be complicated but would still probably boil down to the highest price within reason.

Dollar General Corporation (NYSE: DG) is a Stock to Own for the Next Decade!  It just saw a secondary offering where Kohlberg Kravis Roberts & Co. (NYSE: KKR) and private equity affiliates sold stock.  This has risen significantly since its re-IPO and each pullback has only proven to be a bargain-bin buying opportunity.  To prove a point, the stock hit a 52-week and all-time high of $38.33 on Friday and Warren Buffett’s new portfolio manager bought shares for Berkshire Hathaway Inc. (NYSE: BRK-A).

There has also been buyout interest in Family Dollar Stores Inc. (NYSE: FDO) and Dollar Tree, Inc. (NASDAQ: DLTR).  Family Dollar shares are up 4.5% at $54.38 and Dollar Tree is up only 0.3% at $75.46.

Big Lots Inc. (NYSE: BIG) is no dollar store, but it is very close and it has much of the same customer base.  It has also been under some perceived buyout interest as well.  Its shares are up almost 3% at $34.22 today against a 52-week range of $27.82 to $44.44.

Another close-out store is Tuesday Morning Corp. (NASDAQ: TUES) and it is often overlooked because it has a mere $172 million market capitalization rate.  At $4.03, its 52-week range is $3.38 to $5.93.

99 Cents only is trading up almost 10% at $20.50 today and it hit a new year high of $20.90 earlier.  Before 2005, this one was worth $30 and $35 at the peak and it pays no dividend.

Again, you do not have to like what the growth of discounters and the growth of dollar stores says about America.  Frankly, it is not very pleasant and it fits in with the theme of lower median income and higher poverty.  If Warren Buffett and private equity giants have so much interest in this sector, ask yourself if there is money to be made.

The TJX Companies, Inc. (NYSE TJX) may be too large now for private equity buyers to focus on with its $21.5 billion market valuation.  At $56.65, its stock is pennies away from the year high of $56.78 and that Barron’s $60+ target is looking much closer now.

Family Dollar is the only real dividend in the dollar sector with a 1.4% dividend yield.  TJX Companies is roughly the same dividend yield.  Wal-Mart offers the highest yield of most retailers, but again: Dollar Stores Are The Next Wal-Mart!

Here is the funny thing… Dollar stores are no longer cheap against the stock market.  They are expensive for the simplest of explanations: this is a secular trend and the growth rate looks to be continuous for this segment.

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JON C. OGG

There is a reason that there has been buyout interest in the sector as Family Dollar Stores Inc. (NYSE: FDO), Dollar Tree, Inc. (NASDAQ: DLTR), and 99 Cents Only Stores (NYSE: NDN) have all either been approached or have been believed to be possible private equity targets.  Ditto for the discounter that is no dollar store of Big Lots Inc. (NYSE: BIG).

Dollar General remains one of our Top Stocks To Own for the Next Decade despite its price rise.  We have said, each time the private equity backers sell it just gives you a free discount to buy shares.  Is it just a coincidence that Dollar General was recently added as a new Warren Buffett stock as Berkshire Hathaway Inc. (NYSE: BRK-B)?  Team Buffett has almost 1.5 million shares of common stock now.  Berkshire will likely buy more stock, and we would not be shocked at all if the conglomerate bought shares in this 25 million share offering.  Buffett and his portfolio managers understand the secular trends here that are working for the dollar stores.

Kohlberg Kravis Roberts & Co. (NYSE: KKR) still has control over Dollar General even after today’s offering.  This will not be the last secondary offering from them.  If you look at the history of these secondary stock offerings from KKR each dip has been simply another opportunity to get into Dollar General shares cheaper than before.

Citigroup, Goldman Sachs, and KKR, along with BofA Merrill Lynch and J.P. Morgan, were the joint book running managers; co-managers are Barclays Capital, Wells Fargo, Sanford C. Bernstein, CICC, Deutsche Bank, and HSBC.

As the float has grown larger and larger, each successive secondary offering is less and less dilutive to the float.  That is why shares are down only 1.3% at $34.54 today and why the share sale commanded only about a 1% discount.  The consensus price target from Thomson Reuters is $39.60, and the 52-week trading range is $26.65 to $37.13.

JON C. OGG

Dollar General raised the lower-end of its guidance as well and sees the year coming in at $2.22 to $2.30 EPS versus a prior range of $2.20 to $2.30 EPS.  The company also sees 12% to 14% sales growth this year, up 1% on each side from prior targets.  Same-store sales are also now expected at 4% to 6%, 1% higher on each side than a prior forecast.

The news is good news for “dollar and low-priced stores” rivals like Family Dollar Stores Inc. (NYSE: FDO), Dollar Tree, Inc. (NASDAQ: DLTR), and 99 Cents Only Stores (NYSE: NDN).  It is no wonder that M&A interest is in the sector.  Last week we saw some of the same from Big Lots Inc. (NYSE: BIG) for its close-out sales that are discounted but not always anywhere near $1.00.

The reality is that this all spreads more bad news for the likes of Wal-Mart Stores Inc. (NYSE: WMT).  In many ways, dollar store chains are the “The New Wal-Mart” if you go back to the early 1990s.

Dollar General is one of our Top Stocks To Own for the Next Decade.  It is also a recently added Warren Buffett stock as Berkshire Hathaway Inc. (NYSE: BRK-B) has almost 1.5 million shares of common stock now.  That Buffett stake is likely to increase as Buffett and his portfolio managers understand the secular trends here.

Kohlberg Kravis Roberts & Co. (NYSE: KKR) still has control over Dollar General.  The one caveat we have always had with this one is that insiders tend to unload blocks of shares when there is a price spike.  We would not be surprised if that happens again, and that dip is most likely just another opportunity to get in cheaper.

Earlier in the pre-market we had shares up at $35.50, which would have been a new 52-week high.  With an hour until the open, the stock is up almost 3% at $34.80 and the 52-week trading range is $26.64 to $35.09.

Challenging 52-week highs even with a huge share overhang is more than impressive enough.  Dollar General is a winner of “the trade-down economy” and this does not seem to be just a fad.  This seems to be a secular trend, and the company manages to keep reaching up for more and more business as well.

JON C. OGG

Big Lots reported adjusted EPS of $0.52, beating the consensus estimate of $0.44, and revenue of $1.17 billion, barely above an estimate of $1.16 billion. The company also raised its full-year EPS guidance to $2.80-$2.90, the top of which is in-line with a consensus estimate of $2.89. The company’s shares have gained about 7% in the past 12 months.

Several of its competitors, and near-competitors, have posted similar 12-month gains. 99 Cents Only Stores (NYSE: NDN) and Tuesday Morning Corp. (NASDAQ: TUES) fall into the same range. Dollar General Corp. (NYSE: DG) shares have risen about 15%, and Dollar Tree, Inc. (NASDAQ: DLTR) shares have jumped 50%.

Since the beginning of the year though, Tuesday Morning shares are down nearly -30% and Dollar Tree’s gains have grown by less than half as much. The biggest portion of these stores’ 12-months gains came during the 2010 holiday season.

A March buyout offer for 99 Cents Only from Leonard Green & Partners gave the company’s shares a boost in March, and there is a rumored counter-offer coming from Apollo Global Management. Tuesday Morning announced a $5 million share buyback program a couple of days ago to give its share price a needed boost. Seasonal impacts are also having an effect.

As the back-to-school season nears its end, the stores have jumped back from a dive at the beginning of the month related to the downgrade of US debt. Solid back-to-school sales could put these stores in a position to reap even larger benefits for the coming holiday season.

Face it, the US economy is not going to get any stronger between now and the end of the year. The deep discounters aren’t going to lose any customers to pricier competitors like Wal-Mart Stores Inc. (NYSE: WMT) or Target Corp. (NYSE: TGT). If anything, the dollar stores will gain customers.

Big Lots shares are down about -0.25% in the early afternoon, at $32.29, in a 52-week range of $27.82-$44.44. 99 Cents Only shares are down nearly -1%, at $18.25, in a 52-week range of $14.32-$20.75. Tuesday Morning’s shares are off more than -2.5%, at $3.72, in a 52-week range of $3.38-$5.93. The SPDR S&P Retail ETF (NYSE: XRT) is down more than -2%, at $46.10, in a 52-week range of $35.79-$56.44.

Paul Ausick