WMT, Walmart increased the dividend by 1.92% making this dividend champion’s 46th consecutive year dividend increase.

The old dividend rate was 2.08 annual dividend payout (0.52 quarterly), the new rate is 2.12 (0.53 quarterly).

Our current fair value of the company is $49.20 a share so at the current price of $97.85 the stock is overvalued. In order for this stock to be marked a “buy” our three conditions must be met for us to buy the stock.

The three conditions that the stock must meet are:

1) in a correction mode – fail
2) the current stock price must be below a fair value – fail
3) the 5 year average dividend yield must be lower than the current yield – fail

Since only two of the conditions are met, we mark it a “HOLD”.

The current yield is 2.17%.

The 10 year YOC would be 2.59% with no dividend reinvestment and 3.20% with DRIP. This is a mediocre dividend growth and it would not reach 10% YOC in 10 years at the current price even with reinvesting the dividends. The average 5 year dividend growth of this stock is only 2.00%.

The company share price outperforms the S&P 500 index in long term. If you invested 10,000 dollars in 1995 and held for the last 24 years, the stock average total return would be 10.67% vs 8.74% of the index, and your holding would grow to $109,483.11 dollars as opposed to $74,181.33 dollars of the index.

This makes this stock an acceptable source of income by a stable and solid dividend growth payer, but I would recommend adding this stock to a portfolio only when trading at a better price or when your portfolio is already matured. It would be a good capital growth position as it is in some sense a great competitor to Amazon (AMZN) as long as they keep doing it right and getting involved in online shopping the way they do. If the trend of adjusting their business continues, this may be a good cheap alternative to Amazon. However, to buy in, we would need a price drop to a more favorable level.

Note, that during accumulation phase, I recommend seeking both – the dividend growth and capital appreciation. If you are a retiree and plan on living solely from your dividends then you do not need capital growth and this income stock is a safe investment.

 
Disclosure: Currently, I am long WMT shares. It is in our watch list and since it is now ranked as “HOLD” I do not plan adding more shares to our portfolio at current price.