Walmart Stock Analysis & Dividend Review

Walmart’s Dividend Growth and Yield Are Nothing To Brag About, But…

It’s time for a Walmart stock analysis. Why? Because I have been asking myself if Walmart is still a good dividend stock?

Or, has Walmart dividend growth become an afterthought to company management?

So let’s assess Walmart stock and its dividend. By completing a Walmart stock analysis. Let’s see what we can uncover about dividend growth, dividend safety, stock valuation, and much more.

Because Walmart is a long-time member of our Dividends Diversify model dividend stock portfolio.

Walmart stock analysis

Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

Let’s get started by answering some key questions. Then, dig into the details that support the answers.

Is Walmart A Good Dividend Stock?

 I do not consider Walmart a good dividend stock.  Just my humble opinion, but this stock analysis reinforces my view.

Why is Walmart no longer a good dividend stock? First of all, its dividend yield is too low for a portfolio of stocks paying regular income. We know Walmart’s dividend yield is usually less than 2%.

Furthermore, annual dividend growth is slow, also about 2%. And management allocates a significant amount of cash to share repurchases. Rather than dividend increases.

But, from my dividend investor’s perspective, Walmart has a couple of redeeming qualities. What are they?

For one, limited investment risk. Also, a high degree of dividend safety. Because I’m quite certain future dividend payments from Walmart are safe and secure.

Finally, if you want to retire on dividends, managing investment risk is important. And Walmart scores high as a low-risk dividend stock.

Is Walmart A Good Stock To Buy And Hold Long-Term?

Now, let me broaden my investment perspective. Once I do so, I consider Walmart in a group of good stocks to buy and hold long-term.

First of all, I believe Walmart is meeting the challenges of competing at a high level for e-commerce revenue. Furthermore, they have reinvented themselves to become an omnichannel retailer. Finally, their operational expertise, scale, and financial backing are forces their competition will have to deal with for years to come.

Most importantly, when I look back at the last 2 bear markets, Walmart stock has been one of my best performers. First, during the financial crisis of 2008-2009. And more recently, during the short but steep bear market of 2020.

I like having 1 or more holdings in my dividend stock portfolio that has a stable track record of performance during difficult economic times. And, Walmart has proven that not just once, but twice over the long-term.

It’s one of those stocks to buy, hold and forget about. Perfect for an IRA where long-term investing is important.

Have you been thinking about opening an IRA? Don’t delay planning for your future.

Furthermore, M1 Finance is an excellent choice for quickly opening and funding an online IRA account. You can learn more about M1 Finance here.

Is Walmart Stock A Buy Now?

Finally, you may be interested if I think WMT is a buy or sell.

Unfortunatley, Walmart stock does not appear to be a good buy now.

The Walmart stock price appears overvalued. For me, I would like to get at least a 2% dividend yield with any new purchases. That puts my personal buy price at $110 per share.

To conclude, I currently consider Walmart stock a solid long-term “hold”. And a buy only on dips below $110 per share.

Finally, we can always hope that management will loosen up their purse strings and allocate more cash to dividend increases in the future.  But hope is not one of the best dividend portfolio-building tips I have to offer!

What Is Walmart’s Stock Symbol

Walmart trades on the New York Stock Exchange under the ticker symbol WMT. (NYSE: WMT)

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Next, a little background on this big company…

Walmart Company Background

Walmart is an American multinational retail corporation.

They operate a chain of hypermarkets, discount department stores, and retail grocery stores.  Walmart also owns and operates Sam’s Club retail warehouses. The company has thousands of stores and clubs in dozens of countries.

Headquartered in Bentonville, Arkansas, Walmart was founded by Sam Walton in 1962.  And was incorporated on October 31, 1969.

Source:  Wikipedia

Walmart Operating Segments

Walmart does business through 3 operating segments.

Walmart U.S.

First of all, Walmart U.S. is the largest segment and operates retail stores in the 50 United States, Washington D.C., and Puerto Rico.   They have 3 primary store formats plus digital retail through Walmart e-commerce.

The U.S. segment has historically contributed the greatest share of company sales and operating income.

Walmart International

Walmart International is the second largest segment and consists of operations in dozens of countries outside of the U.S.  International operations include numerous store formats as well as digital retail.

Sam’s Club

Sam’s Club consists of membership-only warehouse clubs and operates in most of the United States, Puerto Rico, and internationally.  This segment also offers digital retail for customers.

Sam’s Club accounts for the smallest portion of net sales.  As a membership-only warehouse club, membership income is a significant component of the segment’s profit.

Walmart Business Strategy

Walmart believes that price, access, assortment, and experience drive a customer’s choice of retailer.  Historically, Walmart led on price and assortment.

However, retail environments are more competitive today. Especially with the increasing demand for e-commerce shipments to our homes.  So to win, Walmart strives to

  • Lead on price
  • Invest to differentiate on access
  • Be competitive on assortment
  • Deliver a great customer experience

They want to understand not only what their customers want and need, but also where they want it and how they want to experience it.

Walmart's business strategy

My Personal Experience With Walmart’s Customer Proposition

I have never been a big fan of Walmart’s in-store experience.  Large, congested parking lots and stores to navigate.  And battleship-style shopping carts.  This has never been my favorite way to spend time.

In contrast, I do like the low prices for commodity goods and brand-name products.   Because of this, I am willing to put up with the inconvenience to save money in-store from time to time

I have only ordered online from Walmart on a few occasions.  The online experience was pretty smooth and the product arrived quickly with free shipping.

On the other hand, I wanted to return a product purchased online because it did not meet my needs.  The product had a no return policy.  I wasn’t exactly sure why.

I speculated it was due to the product being directly shipped from the manufacturer. It was a small purchase, so I didn’t let it bother me.

Ultimately, the big question is if Walmart can compete effectively with Amazon for online sales?

That’s enough about my Walmart shopping experiences.  I’m an investor. Not much of a shopper.

So let’s get back to the Walmart stock analysis with a special focus on Walmart’s dividend. Because I want to cover everything we need to know about the dividends paid by Walmart…

How Much Is The Walmart Dividend?

First of all, the company pays an annual forward dividend of $2.20 per share.

The annual forward dividend is the last dividend payment approved by the company. Multiplied by the number of times a company pays dividends each year.

Walmart Dividend Yield

Based on the recent stock price, Walmart’s dividend payout puts the Walmart dividend yield at 1.7%.

The Walmart dividend yield is a little low for my taste. I prefer a dividend yield between 3 and 5%.

When a stock’s dividend yield is this low, I like to see higher dividend growth in the range of 7-9%. Otherwise, the dividends become irrelevant to me.

We will get to Walmart’s dividend growth shortly.

But first, a couple of other questions and answers about the Walmart dividend.

How Often Does Walmart Pay A Dividend?

Walmart pays its dividend 4 times per year. But they do not follow a typical quarterly dividend payment pattern. Since dividend payments are not made in 3-month intervals like most U.S.-based companies.

In What Months Does Walmart Pay Dividends?

Walmart pays dividends in the following months. Dividends start in January and continue in April, June, and September.

What Is The Ex-Dividend Date For Walmart Stock?

Do you want to receive Walmart’s next dividend payment? Then, you need to complete your purchase of Walmart stock before the ex-dividend date.

Walmart’s ex-dividend date is approximately the 10th day of each month during which it pays a dividend. Since the date varies, it’s a good idea to check Walmart’s dividend history on its investor relations website. There you will find the exact ex-dividend date for each quarterly payment.

Here is another interesting point about Walmart’s dividend payment pattern and practices. They declare and approve all 4 quarterly dividend payments at the beginning of the year.

In contrast, most United States-based dividend stocks declare and announce each quarterly dividend payment individually. And do so as the year progresses.

Walmart Dividend History

Walmart has a dividend history rich in achievement.

They declared their first annual dividend in 1974. And have increased their annual cash dividend every year since then.

WalMart Is A Dividend Aristocrat

This represents a remarkable streak of annual dividend increases. It qualifies the company as a Dividend Aristocrat.

Aristocrats are companies trading in the S&P 500 stock index. Also, they have paid and increased their dividends for at least 25 consecutive years.

Furthermore, I am quite certain Walmart will become a Dividend King soon.

Dividend Kings are rare and special companies. They have increased their dividend payouts for at least 50 consecutive years.

Both Kings and Aristocrats are excellent options. For any investor looking to make reliable and consistent income from dividends.

But, I promised I would get to Walmart’s dividend growth rate. Let’s see what that looks like now.

Walmart Dividend Growth Rate

Based on table 1 shown below, you can see Walmart’s dividend growth rate is quite low. This is not what I like to see when Walmart stock has a sub 2% dividend yield.

Table 1: Historical Walmart Dividend Growth Rate Percentage

1 Year3 Years5 Years7 Years
1.9%1.9%2.0%2.0%
Walmart compound annual dividend growth rate

The dividend increase for the fiscal year 2022 was no exception.  Management announced another small increase of 1.9%.

In chart 1 shown below, check out how the Walmart dividend growth rate has slowed.  Prior to 2014, the Walmart dividend grew rapidly.

But the flat slope to the annual dividend rate line indicated in the chart and starting in 2014 tells a different story. Specifically, management has reduced Walmart’s dividend growth dramatically in the last 7 years.

Chart 1: Historical Walmart Dividend Growth Rate in Dollars Per Share

Walmart dividend growth rate
Walmart annual dividend per share growth rate

Walmart Revenue

Walmart’s business strategy states it well.  Competition in the retail environment is challenging with the likes of Target, Walgreens, Aldi, and others competing for the same customers.

The competition has taken a toll on Walmart’s revenue growth. Revenue finally started to grow slowly in fiscal years 2018 and 2019. But the growth rate only amounted to about 2-4% per year.

Then, in the fiscal year 2021, Walmart benefited from the global health crisis. And the trend of spending more time cooking and relaxing at home that came with it. Also increased online shopping. For which Walmart was well-positioned.

As a result, sales growth inceased into the mid single digit percentages.

Chart 2: 7 Year Walmart Annual Revenue Trend

Walmart stock analysis: revenue trend

On the other hand, it’s very hard to grow revenue rapidly based on their current size. Because Walmart is one of the largest companies in the world as measured by annual revenues.

Let’s move back to the dividend and look at payout ratios…

Walmart Dividend Payout Ratio Based On Earnings

As shown in chart 3, Walmart’s earnings per share were pressured in fiscal years 2018 and 2019 by a host of one-time factors.  They included:

With those one-time charges out of the way, the fiscal years 2020 and 2021 provide a normalized view of Walmart’s profitability.  And a good view of Walmart’s dividend payout ratio.

Chart 3: 7-Year Trend Of Walmart Dividends And Earnings Per Share

Walmart dividend payout ratio: earnings based

I see a dividend that is well covered by earnings. Specifically, the Walmart dividend payout ratio based on earnings for the fiscal year 2021 was 45%

Walmart Dividend Payout Ratio Based On Cash Flow

Next, let’s check Walmart’s dividend payout ratio against free cash flow.

I know Walmart has had to make significant investments in technology to compete with Amazon. And spend additional capital on stores to improve the customer in-store shopping experience.

All of those expenses and capital expenditures take cash. And our dividends are paid from the cash that is left over.

Chart 4: Walmart 3-Year Dividends & Cash Flow Trend

Walmart dividends and cash flow

Based on the chart above, Walmart generates ample free cash flow.  Over the 3-year period, the Walmart dividend payout ratio based on that cash flow is just 33%.

Walmart uses the rest of its free cash flow to buy back stock, pay down debt, and improve its liquidity position.  I have no issue with the use of cash to reduce debt.

On the other hand, I would prefer to see some of the cash allocated to share buybacks go toward larger dividend increases. This shows that Walmart has the capacity for larger annual dividend increases. However, they choose not to do so.

Walmart Dividend Policy

A company, like Walmart, that has paid increasing dividends for nearly 50 years has a dividend policy. However, I have not seen formal communications from the company regarding the elements of that policy.

By looking at Walmart’s dividend history, I can put the Walmart dividend policy in my own words. Here it is…

Walmart has plans to pay dividends each year. And they intend to increase the dividend rate per share each year by at least a small amount.

Beyond those 2 conclusions, I can not speculate further. So, that leads me to my Walmart dividend growth rate forecast.

Walmart Dividend Growth Rate Forecast

I get no indication from reading Walmart’s investor materials that they plan larger dividend increases in the near future.

My best forecast is that Walmart’s future dividend growth will be similar to recent years. So, I am going to use a 2% Walmart annual dividend growth rate for my income planning and Walmart stock valuation purposes.

Walmart Financial Position

As previously mentioned, Walmart has been using free cash flow to reduce debt in the last several years.  So, debt to equity checks in at a very reasonable .7.

Plus they have a large chunk of cash sitting on their balance sheet. To cover upcoming debt payments if need be.

Furthermore, Moody’s and S&P give Walmart Aa2 and AA credit ratings, respectively.  They are “Investment Grade – Low Credit Risk” ratings.

Table 2: Credit Rating Evaluation Grid

Credit rating evaluation grid for each major rating agency

It is rare for a company to be rated much higher than this. The diversified health care company Johnson & Johnson and tech giant Microsoft are the only 2 US-based companies with AAA credit ratings.

To conclude, Walmart has a strong balance sheet and a high credit rating based on these metrics. Their financial position is very strong.

On a side note, I suggest keeping an eye on your personal credit score. You can check it for free using Credit Karma. You can learn more about Credit Karma here.

Walmart Dividend Safety

I judge Walmart’s dividend to very safe from a reduction for the foreseeable future. I make this assessment based on:

  • Walmart’s dividend payout ratio
  • Excellent financial position
  • Stable business model

Next, let’s look at Walmart stock valuation. Then, I will wrap up.

Walmart Stock Analysis: Stock Price Valuation

Walmart stock looks overvalued using most valuation measures.

Let’s prove it out by looking at Walmart stock value using several methods and resources:

  • Dividend discount model
  • Price to earnings ratio
  • Morningstar fair value estimate
  • The Simply Investing Report

Walmart Dividend Discount Model

The Gordon discount model considers several factors I have discussed thus far.

  • Current dividend payment
  • Projected dividend growth

Plus, my desired annual return on investment of 9%.

Using these assumptions, the dividend discount model is not kind to Walmart’s stock valuation.

The dividend discount model doesn’t like the low Walmart dividend combined with low dividend growth.  And it judges the fair value of Walmart stock to be $32.  This is well below the current market price.

Dividend growth would have to approach 7-8% for the dividend discount model to suggest Walmart stock is a buy.

Walmart Stock Price to Earnings Ratio

The Walmart stock price to fiscal 2021 earnings is about 27 times. This is pretty high. But, it is not surprising.

High-quality stocks with safe dividends normally come at a premium price. And often trade with a PE ratio between 20 and 30 times earnings.

Morningstar Fair Value

The investment analysis firm Morningstar believes Walmart stock is fairly valued at $124 per share.

The Simply Investing Report

Simply Investing stock analysis

Let’s cross-check my Walmart stock analysis with the Simply Investing Report. It’s an excellent publication that provides dividend stock research and recommendations.

First of all, the Simply Investing Report considers Walmart stock undervalued.

Simply Investing places a lot of emphasis on dividend yield for valuation purposes. Specifically, the current dividend yield must be higher than the average dividend yield over the past 20 years.

Furthermore, Simply Investing grades Walmart a 6 out of a possible 9 using the Simply Investing criteria. This is an excellent score.

Read My Review: Dividend stock analysis & recommendations from Simply Investing

Walmart Stock Analysis & Dividend Review Wrap Up

This completes the Walmart stock analysis and assessment of the Walmart dividend. So, what did we learn?

Walmart is a high-quality buy-and-hold stock. For long-term investors.

However, the stock’s dividend metrics are not all that impressive for a dividend investor. Furthermore, the shares look a little overvalued based on the share price as of the time of this article.

Further Reading About Dividend Investing And Dividend Stocks

My Favorite Dividend Investing Resources

The dividend investing resources I mentioned in this article are summarized here for your convenience.

I use all of them. To make the most of my money and investments.

Trade stocks for free using the Webull app
Get dividend stock recommendations from Simply Investing
Use Morningstar for insightful investment analysis
Check your credit for free using Credit Karma
Manage your total financial picture for free using Personal Capital

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I own Walmart stock & receive the Walmart dividend.

4 thoughts on “Walmart Stock Analysis & Dividend Review”

  1. Hi Tom,

    As a consumer, I’m a fan of Walmart and Sam’s Club. I’m also a shareholder, but agree that it’s currently overvalued. Despite the low dividend, I would add to my position if there’s a big dip.

    Cheers,
    Miguel

  2. Haha “battleship style shopping carts”

    I’m not a fan either. It’s too big, there are too many people, and I often feel bad for the 75 year old Walmart greeter (though that’s my assumption…they might be wanting to work there, who knows!)

    Great analysis. That’s a low dividend– they are doing very well during this pandemic though and seem to be trying to keep up with the online ordering.

    One time I ordered a Christmas tree online from Walmart and was impressed with the customer service when I picked it up at the store.

    • I think the in-store experience has improved in recent years. But you are right, the stores are so big, it’s hard to find what you are looking for sometimes. Tom

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