Tuesday, March 29, 2011

Walmart And The 2.8% Yield

[Walmart is finally a decent value play at $52 per share. The stock has traded like a bond with the stock now moving much for the past decade. Walmart now has a 2.8% yield which makes the company a decent dividend play.  Walmart generates significant cash flows and has enough earnings power to start pumping up the dividend. Let's take a look at the company's most recent earnings results for the past quarter]

[Walmart had total revenues of $5.02 billion. Earnings per share came in at $1.41 a share. Both numbers are an improvement over last year’s Q4 numbers.  Earnings rose 6.3 percent to $15.4 billion dollars. Same store sales growth was down 1.8% this past quarter after declining 1.3% two quarters ago. This makes it seven straight quarters of negative same store sales growth. Next quarter, same-store sales for the first quarter should are projected to be flat to negative 2 percent.

The stock currently  trades at 11.7 times earnings and 10.9 times future earnings. Walmart trades at 0.44 times sales, 2.7 times book value, and 1.1 times earnings growth. Those are all reasonable valuations for the big box retailer. The stock is not as attractive because of its tepid growth rate but because of its dividend yield.


Sales in the United States account for $71 billion dollars in revenue and overseas sales account for $31.4 billion dollars annually. The nearly 9% international growth is a lot more attractive than the domestic growth. Walmart pays out almost 30% of earnings via dividend distributions. That yield is right in line with the payout of competitors. The current 2.8% yield is good but there is room for a significant increase in the future.

Dividend investors could finally consider picking up shares if the yield hits 3%]

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