Here’s an 87-year-old business that is down almost 27% since July and is now trading at a single-digit valuation.

Albertsons Companies, Inc. ($ACI) is one of the largest food and drug retailers in the United States. The company operates over 2,200 grocery stores and pharmacies across 35 states.

Albertsons owns many recognizable supermarket chains, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, and Kings Food Markets. The company was also an acquisition target, with Kroger attempting to buy Albertsons in late 2022. That deal fell apart due to regulatory pressure, and Albertsons’ stock subsequently imploded.

The stock plummeted from over $35 per share down to its current price of less than $17.

Today’s article examines Albertsons as both a dividend investment and a “coiled spring” turnaround play.

Let’s start with the good news…

Did you know that the average American spends 2% of their life inside a grocery store?

Food is about as essential an item as it gets, so there will always be a demand for grocery stores and supermarkets. Likewise, this isn’t the entertainment business where companies need to compete on spectacle. A grocery store can differentiate itself with a relatively small marketing budget or a few simple branding tweaks.

For example, where I live in Brazil, there’s a supermarket chain called Oba Hortifruti where each aisle features a different animatronic character singing about the benefits of fruits, vegetables, dairy, and other foods.

Pretty silly, but kids love it, and it helps the business stand out from competitors.

Albertsons owns more than 20 grocery store chains, each with its own distinct identity and regional appeal. These locations also benefit from a geographic moat, since most consumers aren’t willing to drive an hour out of town to save a few dollars on bread and eggs.

As an investment, Albertsons is fairly stable.

The company pays a 3.73% starting dividend yield, which is well covered by a payout ratio of just 27.65%. And while Albertsons doesn’t raise its dividend every year, it does issue enough large raises to beat inflation over the long-run.

For example, in 2025 the company raised its dividend by 25%. In 2021, it boosted the payout by 20%.

It’s also worth noting that Albertsons announced a $2.75 billion share repurchase program in October 2025. CEO Susan Morris stated, “We believe our current share price undervalues the strength of our business and long-term growth.”

Growing dividends, share buybacks, and a low payout ratio. What’s the problem?

The biggest drawback is the industry Albertsons operates in.

Retail, especially grocery retail, is a low-margin business. Albertsons operates with a net profit margin of roughly 1.2%. In other words, the company earns about $1.20 in profit for every $100 of goods it sells.

For comparison, Meta Platforms has a net profit margin north of 30%.

Big Tech companies often get criticized for producing strange or unpopular products, but firms like Apple, Google, and Meta can afford to take big risks and make mistakes. Grocery stores don’t have that luxury.

With a 1.2% profit margin, a company like Albertsons is slow-growing and must operate defensively.

The upside?

Albertsons is currently priced for death. Any good news should send Albertsons higher.

The company current trades at a price to earnings ratio of just 7.5. Tobacco grower Universal Corporation, a stock most people have never even heard of, has a higher valuation.

At today’s price, Albertsons is so cheap that, eventually, something has to give.

Here’s an example of a similar investment situation that I experienced last year.

In 2025, I wrote several reports about PACCAR Inc ($PCAR). This is a company that’s been in business for over 120 years and was repeatedly hammered by Wall Street whenever tariffs or trade disputes re-entered the news cycle.

I thought the company was a great buy under $100.

PACCAR had a well-protected dividend, and the stock appeared to be trading at an abnormally cheap valuation.

Eventually I was proven right. PACCAR rebounded and my position is now up 22.75%.

Albertsons is not a high-growth business, but its share price is so depressed that any good news should send the stock higher. If Wall Street merely rerates the stock to a price to earnings ratio of 10, Albertsons would trade at around $21.50 per share.

This is a cheap company with a 3.73% dividend yield, a low payout ratio of 27.65%, and a history of dividend growth that outpaces inflation.

Between its dirt-cheap valuation and high starting yield, Albertsons is a reasonable income investment. Even compared with beaten-down blue chips like Procter & Gamble and Clorox, the stock trades at a significantly lower valuation.

If you’re looking for a dependable dividend stock with a single-digit PE ratio and a share price under $20, Albertsons fits the bill.

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Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.