Walmart’s Roll Back!

I mentioned in a previous article about spending a lot of time and money at Home Depot over the past few days.  I also visited my local Walmart (WMT) store a few times as well.

Taking a look at Walmart as an investment, hasn’t crossed my mind in a couple of years.  So, I thought it was about time to take another look at the giant retailer.

The Dividend

As far as Walmart’s dividend goes, the reasonable 1.80% yield is not as attractive as others, but their payout ratio a respectable 25-30% on average.

Not only that, Walmart has grown their dividend from $0.24/share in 2000 to $0.88/share in 2007.

The main thing about Walmart is that, while they could increase the payout ratio to pay more cash to investors in the form of dividends, they continue to create shareholder value in other ways.

Shareholder Value

While some investors have shunned Walmart for their lack of cash dividends, the company has created significant shareholder value through re-investing equity at a rate of 22% over the past several years.

In addition, Walmart has committed to several large stock buybacks, recently announcing that they may buy back as much as $15 Billion of their own stock!  Buying back stock when it is value priced is normally seen as a smart use of free cash flow.

The Future

With a P/E ratio of 15 and earnings increasing in the 15% range on a yearly basis, we can expect that Walmart should continue to raise their dividend and provide growth in capital as well.

The author does not own shares of Walmart

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