Dividend Stock Wednesday: Wal-Mart (WMT)

Written by The Dividend Guy on January 30, 2008

Wal-Mart Logo

This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.

TDG Points - 12

The Wal-Mart stock has finally shown some signs of life in the past few weeks. I have been an owner of Wal-Mart for some time now, and the last few years has not been the best for the stock. Concerns over the ability to grow given its already mammoth size and the backlash on labor practices and the perception that once a company comes into a community all other stores around it suffer. These are real issues that an investor must understand before making a decision to buy the stock. I decided to take a more in depth look at Wal-Mart as part of my overall portfolio review. Here is that review for you to see.

The Company: Wal-Mart Stores Inc. (WMT-NYSE)

The Company operates retail stores in various formats around the world. Wal-Mart Stores retail formats include: Discount Stores, Supercenters, and Neighborhood Markets.

Dividend Aristocrat (25+ yrs dividend growth)
 Yes
Dividend Achiever (10+ yrs dividend growth)
 Yes

THE FUNDAMENTALS

Revenue

Revenue - Wal-MartClick to Enlarge

Revenue Scoring

Criteria Scoring
Consistenly Up with No Down Years 1.0
Up Trend with < 2 Down Years 0.5
Choppy with > 2 Down Years 0.0
My Revenue Score 1.0

Earnings Per Share

EPS - Wal-MartClick to Enlarge

Earnings Per Share Scoring

Criteria Scoring
Consistenly Up with No Down Years 1.0
Up Trend with < 2 Down Years 0.5
Choppy with > 2 Down Years 0.0
My EPS Score 1.0

TOTAL FUNDAMENTALS SCORE: 2.0

THE RATIOS

Return on Equity

ROE - Wal-MartClick to Enlarge

Return on Equity Scoring

Criteria Scoring
Above 15% for Last 5 Years 1.0
At Least One Year Below 15% in Last 5 Years 0.0
My ROE Score 1.0

Other Ratios

Ratio Criteria Value Score (Pass=1 / Fail = 0)
Debt to Equity < 0.50 0.75 0.0
Payout Ratio < 60% 27% 1.0
Credit Rating > BBB+ 0.52 1.0
Total Ratio Score
-
-
2.0

TOTAL RATIOS SCORE: 3.0

DIVIDEND DATA
Annual Dividends

DPS - Wal-MartClick to Enlarge

Dividend Scoring

Criteria Scoring
25+ Years of Dividend Growth 1.0
10+ Years of Dividend Growth 1.0
< 10 Years of Dividend Growth 0.0
My Dividend Growth Score 2.0

TOTAL DIVIDEND GROWTH SCORE: 2.0

STOCK VALUATION

Valuation Metric Criteria Value Score (Pass=1 / Fail = 0)
Dividend Yield Cur Yld > 10 Yr Avg Yld 0.8% 1.0
Div Yld Compared to SPY Div Yld Cur Yld > SPY Yld 2.3% 0.0
P/E Ratio Cur P/E < 10 Yr Avg P/E 28.1 1.0
Relative P/E Relative P/E < 1.0 0.55 1.0
Price to Sales < 1.5 0.52 1.0
Total Ratio Score
-
-
4.0

Canadian Shareowner’s Association Stock Selection Guide Software Buy Price

Buy Zone
 Maybe Zone
 Sell Zone
 Current Price Rating Scoring (Buy=1.0, Other=0.0)
$38.47 to $49.79
$49.79 to $61.10
$61.10 to $72.42
$48.09
Buy
 1.0

TOTAL STOCK VALUATION SCORE: 5.0

SUMMARY

Points Earned:

12 out of 14

The stock is rated HIGH with 11 points earned through my analysis of the stock. As I currently own WMT and am not looking to add to my portfolio at this time, I am goind to do nothing. However, I would be open to adding to my portfolio if my asset allocation called for more U.S. equity.

Rating Points Required
High 11+ points
Medium 8-10 points
Low < 8 points

Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.

The Dividend Guy owns shares in Wal-Mart (WMT)


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6 Comments so far

  1. Tyler January 30, 2008 9:12 am

    Hello,
    This is an excellent method for evaluating stocks. Do you have a spreadsheet that is available for download?

  2. Stocks on Sale » Dividend Stock Wednesday: Wal-Mart (WMT) January 30, 2008 3:39 pm

    […] unknown wrote an interesting post today onHere’s a quick excerptThis is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis. … […]

  3. Dividendgrowth February 1, 2008 10:07 am

    Interesting analysis on WMT. The company has been trading sideways for 8 years now, while its annual dividends have increased from 24 cents in 2000 to 88 cents in 2007. The payout ratio does look promising , and the valuation looks pretty decent at current levels. My only issue is that its yield is less than 2%. At $50 per share that means that the dividend would have to be raised to $0.25 per quarter OR the stock price would have to be at or below $44,00.
    Good luck with your investment!

  4. Timothy Sykes - Stock Trader, Author, Entrepreneur » Blog Archive » The 74th Festival of Stocks February 4, 2008 10:57 am

    […] Dividend Guy analyzes one of the most boring stocks in existence (WMT) American Consumer News has some retirement advice for […]

  5. Weekly Dividend Investing Roundup - February 8, 2008 » The Dividend Guy Blog February 8, 2008 9:02 am

    […] Sykes hosted this week’s festival of stocks, which included my analysis of Wal-Mart. According to him it is the most boring stock in the world. That is something that I am very ok […]

  6. Lee February 16, 2008 4:03 pm

    Wal-Mart stock has years of history of being an opportunity for stock investment during times when the economy is down trending. Consumers downsize their retail buying while becoming more price conscious; this is an advantage for discount retailers while upscale retailers tend to struggle.
    I don’t see Wal-Mart stock being “boring” for the next few years.

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