Monday, January 27, 2014
Weekly Purchase - WMT
4 shares WMT, 2.54% yield, $7.52 annual income
I like Walmart under $75 and decided to go that route with my purchase this week. Retail stocks took a beating this month as the market corrected and credit card security is still fresh in everyone's mind. Target took a noticeable nosedive and Walmart also seems to have been affected although to a lesser extent. I think both companies are attractive, but I do have more confidence in WMT as a business. Plus WMT is a small position for me in need of a share count boost. I'm happy to add a few shares when possible.
The stats on WMT are currently quite attractive. It has a 39 year dividend growth streak, a very reasonable 14.2 P/E, and a 2.5% yield which is higher than what it typically offers. I'm expecting dividend payments to grow next month because WMT tends to announce increases during the month of February. WMT has a low payout ratio of only 36% leaving plenty of room for future dividend boosts. I don't think I really need to explain WMT's appeal as a dividend growth income stock in detail. Everyone knows how dominant this company is.
I estimate WMT shares should be worth about $85. If that's true (it's only an estimate) I'm getting a margin of safety greater than 10%. As a comparison, Morningstar gives it a 4 star rating on a $80 fair value.
After getting burned with Intel I'm pleased to pick up a company with a high chance of performing to standard. Stock investments are never guaranteed, but I would argue Walmart offers a considerable amount of dividend growth certainty.
I have many free trades available and did not pay commissions today. I plan to continue small weekly purchases until my supply of free trades run out (probably July).
Core Position: No
Speculative Position: No
Expectations: Steady income; 8% annual dividend growth
Automatic Sell: Frozen dividend; dividend cut
Consider Selling: Business fundamentally changes, management becomes untrustworthy, fundamentals deteriorate, wildly over valued stock price, or position fails to meet expectations.