Fresh-faced grocer chain Roundy's is one small-cap spec play with little fanfare but plenty of upside potential, Jim Cramer said Friday.
The "Mad Money" host said the Midwestern supermarket brand — with its $440 million market cap — was right in the speculative sweet spot because of its "notoriously B.I.G." dividend and glorious 8.5 percent yield. Both are highly unusual for a small-cap company.
"That’s an incredible yield," he said. "Even if this stock flat-lines and goes nowhere, by reinvesting that dividend, Roundy’s would allow you to double your money in about eight years."
But Cramer doesn't think the stock is going nowhere. While the price only popped a meager 6 percent after the company filed its IPO back in February (priced at $8.50 a share), Roundy's has quietly risen an additional 21 percent in the aftermarket since then. And even with the soaring yield, he said, the payout is perfectly safe.
"Roundy's has more than enough money to foot the bill, and management is super committed to returning its cash to shareholders in the form of a bountiful payout."
Relative to other grocery store stocks, Roundy's 8.5 percent yield is approximately three times higher, but Cramer posited that the yield will go down once buyers discover the stock and push up the share price — just as it did with Cramer fave B&G Foods.Page 1 of 3 | Next Page