Wal-Mart: Shopping for Dividends
11/21/2016 7:00 am EST
Founded by Sam Walton in 1962, this stock is a multinational retailer engaged in the operation of discount department stores, explains Mario Medina, contributing editor to Vita Nelson's DirectInvesting.
Wal-Mart Stores (WMT) — which also operates Sam's Clubs — is the world's largest company by revenue, as well as the largest private employer in the world with 2.2 million employees.
The mega cap stock is a solid and well-diversified business with wide economic moat and durable competitive advantages over rivals. The firm also enjoys a solid corporate culture.
Consensus estimates call for the company to earn about $4.34 per share this year, and to go to net about $4.36 per share in 2017.
Wal-Mart has paid dividends to investors since 1973, and has increased its payments for 38 consecutive years, which makes it a dividend aristocrat.
During the past 5 years it has increased its dividends at an average rate of 7.5%, and its quarterly payment of $0.50 per share currently provides a yield of 2.87%.
A hypothetical investment in Wal-Mart has grown cumulatively (including dividends reinvested) by 183,792.27% during the last forty years.
The stock exhibits a healthy Dividend Payout Ratio of 44%, which means the company is paying out 44% of all its net income in dividends, and is retaining a large percentage of earnings to reinvest or grow the business.
Its price to earnings ratio of 14.9 is 8.0% below its industry average, and its price to book ratio of 2.8 is 12.5% below its industry average.
According to Morningstar, the stock is trading 8.4% below its Fair Value Estimate, making it attractive for investors with a longer-term investment horizon.
Technically, WMT looks attractive, trading 23.1% below its three-year high, while it is forming a price consolidation pattern between $90 and $57 approximately.
Mario Medina, Editor to Vita Nelson's DirectInvesting