Friday, October 3, 2014

Stock Analysis of Wal-Mart Stores

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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