WMT 70.01 (+0.57%)
US9311421039Retail - DefensiveDiscount Stores

Last update on 2024-06-25

Walmart (WMT) - Dividend Analysis (Final Score: 5/8)

In-depth analysis of Walmart's (WMT) dividend performance and stability using an 8-criteria scoring system. Discover how Walmart fares in delivering shareholder value.

Knowledge hint:
The dividend analysis assesses the performance and stability of Walmart (WMT) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 5

We're running Walmart (WMT) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Criteria
Dividend Yield Higher than the Industry Average?
0
Average annual Growth Rate higher than 5% in the last 20 years?
1
Average annual Payout Ratio lower than 65% in the last 20 years?
1
Dividends Well Covered by Earnings?
1
Dividends Well Covered by Cash Flow?
1
Stable Dividends Since the Company Began Paying Dividends?
0
Dividends Paid for Over 25 Years?
1
Reliable Stock Repurchases Over the Past 20 Years?
0

We analyzed Walmart's (WMT) dividend policy performance and stability using eight criteria. Walmart scored 5 out of 8, indicating a moderately strong dividend policy. Despite a lower recent dividend yield (1.4462% in 2023) than the industry average (1.51%), it generally maintained above 2% over 20 years. Its dividend growth rate, a key measure of increasing returns over time, and payout ratio (averaging 18.33%) support dividend sustainability. Walmart's dividends are well-covered by earnings and cash flow, ensuring stability and growth potential. Its dividend has also been consistently increasing for over 20 years, with no drops over 20%, and has been paid for 25 years, showing solid commitment. Walmart's stock repurchases have broadly positively impacted shareholder value, despite a significant share increase in 2021, likely for strategic reasons.

Insights for Value Investors Seeking Stable Income

Walmart is a stable and reliable option for dividend-focused investors, despite a recent dip in dividend yield. Its long-term consistent dividends, low payout ratio, and prudent stock repurchase program highlight strong financial health and commitment to returning value to shareholders. Investors should investigate the reason behind the 2021 share increase but can generally consider Walmart a dependable investment for steady and potentially growing income.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is the ratio of a company's annual dividend compared to its share price. It's an important measure for investors seeking regular income, as it provides insight into how much cash flow they might expect based on their investment in the company's stock.

Historical Dividend Yield of Walmart (WMT) in comparison to the industry average

Walmart's dividend yield of 1.4462% is marginally lower than the industry average of 1.51%. Comparing this with historical data, Walmart's dividend yield has seen a significant decline since its peak of 3.6148% in 2017. For instance, between 2003 to 2023, the yield has generally been above 2%, indicating a strong return by Walmart compared to the broader market. However, the recent downturn to a yield of 1.4462% in 2023 suggests a lower return on investment in income terms relative to peer companies and Walmart's historical performance. This trend may be concerning for income-focused investors because it suggests a decline in the relative attractiveness of Walmart's dividend compared to both its own historical averages and the present industry standards.

Average annual Growth Rate higher than 5% in the last 20 years?

Explain the criterion for Walmart (WMT) and why it is important to consider

Dividend Growth Rate of Walmart (WMT)

The Dividend Growth Rate (DGR) is a key metric for regarding the growth of dividends provided to shareholders. It is crucial to assess the increasing returns shareholders get from their investments over time. This is pertinent for long-term investors who rely on dividends as a primary source of income.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average Payout Ratio is a measurement of the proportion of earnings a company pays shareholders in the form of dividends. A ratio below 65% is generally considered sustainable.

Dividends Payout Ratio of Walmart (WMT)

Walmart's average payout ratio over the last 20 years is approximately 18.33%, significantly below the 65% threshold. This indicates a very conservative approach in returning capital to shareholders, ensuring that a large portion of earnings is retained for reinvestment and operational flexibility. Notably, 2021's ratio spiked to 46.10% and 2022’s to 45.74%, reflecting perhaps exceptional payouts or lower earnings. Nevertheless, the trend generally remains favorable and suggests sound fiscal management. Given that managing less than a third for dividends ensures significant retained earnings, enhancing Walmart’s ability to reinvest in growth initiatives, this trend can be regarded positively.

Dividends Well Covered by Earnings?

Explain the criterion for Walmart (WMT) and why it is important to consider

Historical coverage of Dividends by Earnings of Walmart (WMT)

The criterion evaluates whether Walmart's dividends are well covered by its earnings. This means comparing the Earnings Per Share (EPS) with the Dividend Per Share (DPS). If the EPS sufficiently covers the DPS, it indicates financial stability and sustainability of the dividend payouts, as the company is generating enough earnings to distribute dividends without depleting its retained earnings or taking on additional debt.

Dividends Well Covered by Cash Flow?

Explain the criterion for Walmart (WMT) and why it is important to consider

Historical coverage of Dividends by Cashflow of Walmart (WMT)

The criterion that dividends should be well covered by cash flow is crucial because it underscores a company's ability to sustain and increase its dividend payouts over time. It reflects the portion of a company’s free cash flow that is used to pay dividends. If a company consistently generates excess cash flow after dividend payments, it signifies financial health and an ability to potentially invest in growth opportunities or return more value to shareholders.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

Historical Dividends per Share of Walmart (WMT)

Examining Walmart's dividend per share over the last 20 years, we can observe a consistent upward trend. Starting from $0.12 in 2003, the dividend has seen regular increases, reaching $0.76 in 2023. Importantly, there is no year within this period that witnessed a decline in dividend payments by more than 20%. This stability is impressive and crucial for income-seeking investors because it provides assurance of consistent and potentially growing income. The upward trajectory with no significant drops suggests that Walmart has been financially stable and committed to returning value to its shareholders. Such reliability in dividend payments positions Walmart favorably among income-focused investors.

Dividends Paid for Over 25 Years?

Assessing whether a company has paid dividends for over 25 years is critical because it shows a long-term commitment to returning capital to shareholders. This consistency often reflects a company's financial stability and profitability over an extended period.

Historical Dividends per Share of Walmart (WMT)

The data shows that Walmart has paid dividends consistently for the past 25 years, with the current examination period spanning from 1998 to 2023. Over this period, Walmart's dividend per share has shown a general upward trend, indicating a commitment to returning value to shareholders. Starting from a modest $0.052 in 1998, the dividend per share has increased to $0.76 by 2023. This consistency and growth in dividends is a positive sign of Walmart's financial health and robust cash flow capabilities, thereby making it a potentially attractive option for dividend-focused investors.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate that a company has consistently returned value to shareholders by buying back shares, thereby reducing the number of shares outstanding.

Historical Number of Shares of Walmart (WMT)

Walmart has demonstrated a reliable pattern of share repurchases over the past 20 years, with the number of shares outstanding decreasing from 4.45 billion in 2003 to around 2.85 billion by 2020. This is indicative of the company's commitment to boosting shareholder value. However, a significant spike in the number of shares—approximately capped at 8.5 billion in 2021—could indicate an issuance of shares for some strategic purpose or funding requirement. Despite this anomaly, the overall trend remains strong with a demonstrated average repurchase rate of 7.5216% per annum over two decades. On balance, the trend is positive, but attention should be paid to the reason behind the 2021 share increase.


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