Dollar General Now Investment Grade

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Dollar General Corporation (NYSE: DG) is becoming less and less leveraged and is getting further and further away from its old private equity umbrella. Oh, and now it is considered “Investment Grade” at Moody’s and it is the first time we have seen this positive of news continuing since its reintroduction as a public company.

The dollar (and near-dollar) store retailer was raised on Tuesday to “Baa3” from “Ba2” in a multi-notch upgrade. It was just on Monday that Standard & Poor’s put the retailer’s ratings of “BB+” for the senior unsecured rating on Positive Watch. The long and short of the matter is that Dollar General is now at the investment grade rating as far as Moody’s is concerned it is one-notch under the investment grade rating but with a bias leaning toward an upgrade at S&P.

The move to the dollar stores is one which continues. These stores have all reached up into higher market prices in the under $5 and even under $10 in recent years as it gets harder and harder to sell products with a healthy margin for under $1.00 at the register when you have to do things like pay rent and pay employees.

The only thing that has been surprising to us is how much these stocks pulled back. At the same time, their shares did run up too high and needed a serious breather. After a 1.5% gain to $51.85 on Tuesday, the 52-week trading range is $39.73 to $56.04.

The action from Moody’s covers about $2.8 billion in debt and strong operating performance was cited. A stable liquidity profile and solid credit metrics were also noted.