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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Stocks to Buy for a Santa Claus Rally

Stocks in this article: WAG PPG PAYX VRSK SWY

Safeway

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With nearly 1,700 stores under its banner, Safeway (SWY), one of TheStreet Ratings' top-rated food and staples stocks, weighs in as one of the largest grocery retailers in the country. And in spite of inflationary margin squeeze and hefty competition, it's a business that's remained reasonably strong in 2011.

Safeway has embraced the big changes in the grocery business, pushing out a successful private label initiative and a nearly $4.5 billion investment in outfitting its stores to compete with new rivals. While that's resulted in a large debt load, it's also kept shoppers pushing their carts through Safeway's aisles.

Even though Safeway's net margins are paper thin, they've been slowly trending higher for most of 2011 -- a testament to management's ability to counter the creep of commodity costs against profitability. Dividends have long been an important part of Safeway's story, and at 2.82%, they remain a compelling reason to own shares of this stock. (Safeway is one of the highest-yielding retail stocks.)

While capital investments haven't been cheap for Safeway, ample free cash flow generation should keep the income payouts flowing to owners for the foreseeable future.

To see all of this week's Rocket Stocks in action, check out the Rocket Stocks portfolio at Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.
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