Family Dollar stock: Should you bet your bottom dollar?

— -- A: As Americans learn again how to save money, many are driving to their nearest dollar store.

Family Dollar is a deep-discount retailer that sells consumable items, like food, and random consumer items, such as toys and home goods.

Through mid-February, shares of Family Dollar had been up 5%. And although they got trimmed in Wednesday's bloodletting, they were still not showing big losses for the year.

While other companies have been suffering big declines in profit, Family Dollar in January reported quarterly net income of 42 cents a share, up 13.5% from a year ago. That encouraged investors to think the company has the right message in an era of belt tightening.

But before you rush to buy shares, keep in mind that dollar stores haven't been the slam dunk you might expect.

But while investing seemed a sure-fire way to make money in 2008, investors have been pretty disappointed in 2009. Perhaps they went overboard last year, but shares of the dollar stores have been suffering. Through Tuesday, shares of 99 Cents Only Stores were down 27% and Dollar Tree's shares were off 8.4%.

Will Family Dollar's shares succumb to the same pressure? It's impossible to say. But it might be valuable to put the stock through the four steps considered as Ask Matt:

Step 1: Risk vs. reward. When you take a risk on a stock, you want to make sure you're properly rewarded. Downloading Family Dollar's trading history back to 1980, we see the company generated an average annual compound rate of price appreciation of 15.8%. That's pretty good if you consider the S&P 500 stock index posted a 10.2% average annual return in the same time frame, says IFA.com.