Friday, September 19, 2014

Wal-Mart (WMT): The Time To Buy Is When No One Likes A Quality Dividend Company

Wal-Mart Stores Inc. (WMT) operates retail stores through three segments: Walmart U.S., Walmart International, and Sam’s Club. This dividend champion has paid a dividend since 1974, has consistent history of share repurchases. and increased it for 41 years in a row. Wal-Mart is also one of the companies, which could be purchased commission-free using Loyal3, with as little as $10.

The most recent dividend increase was in February 2014, when the Board of Directors approved a 2% dividend increase to 48 cents/quarter. This was the slowest dividend increase ever for Wal-Mart Stores. It is likely that management does not expect high earnings growth in the next couple of years.

Wal-Mart has delivered a 9.10% average increase in annual EPS over the past decade. It is expected to earn $5.16 per share in 2014 and $5.64 per share in 2015. In comparison, the company earned $4.85/share in 2013.

Currently, Wal-Mart is attractively valued at 14.40 times forward earnings, and has a dividend yield of 2.60%. I believe that Wal-Mart has what it takes to be successful, and endure changes over the next 20 years. Unfortunately, the company is so large that its future profits growth might not be that high. The valuation is compelling, but the expected earnings per share growth is not going to exceed 6% - 7 % per year. That being said, I will hold on to my existing position, and might consider adding a little more this year, subject to availability of funds and other ideas.

Check the full stock analysis at Seeking Alpha

Full Disclosure: Long WMT and TGT

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PepsiCo (PEP) Dividend Stock Analysis 2014
McDonald’s (MCD) Dividend Stock Analysis 2014
Procter & Gamble (PG) Dividend Stock Analysis 2014
Johnson & Johnson (JNJ) Dividend Stock Analysis 2014


  1. DGI,
    I actually lowered my positions in retail stocks in the last month or so. I have been expecting a general market correction (because, apparently, I'm an idiot) that would make some things much more attractive. WMT is attractive from a valuation standpoint, but the low growth prospects for earnings is a concern. As a substitute for bonds, however, I find it to be solid.

  2. Of my 30 stocks only 4 of them have increased their dividend by double digits. This makes me want to only buy these stocks on dips. Well about 7 stocks have not even announced a dividend yet. But still that is not a lot.

  3. That seems about right. WMT is just one of those companies that even though the growth may seem low at 6-7%, they are just so massive that that few percent in increases translated to millions and millions of increased revenue. And with that they can easily keep paying and increasing dividends like they've been doing for ages. Its essentially the same reasons why I started a position in Suncor (SU); consistently paying and increasing dividends!


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