Over the past decade this dividend growth stock has delivered an annualized total return of 2.60% to its loyal shareholders.
The company has managed to deliver an increase in EPS of 12.20% per year since 2001. Analysts expect Wal-Mart to earn $4.44 per share in 2011 and $4.88 per share in 2012. This would be a nice increase from the $4.18/share the company earned in 2010. On average the company has managed to repurchase 2.20% of its stock annually over the past decade. Wal-Mart has one of the largest and most consistent stock buyback programs in the US.
The company has had a high return on equity, which has remained in a tight range between 20% and 23% over the past decade. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 17.70% per year since 2001, which is much higher than the growth in EPS.
An 18% growth in distributions translates into the dividend payment doubling every four years. If we look at historical data, going as far back as 1976, we see that Wal-Mart has actually managed to double its dividend every three years on average.
Over the past decade the dividend payout ratio has increased from 18.70% in 2001 to 29% in 2010. This has mostly been as a result of dividend growth being faster than earnings growth. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently Wal-Mart fits my entry criteria as it is trading at 12.30 times earnings, yields 2.70% and has a sustainable dividend payout. I would consider adding to my position in the stock subject to availability of funds.
Full Disclosure: Long WMT
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