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).

Symbol: WMT
Core Position: No
Speculative Position:
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.  


  1. Hi CI,
    Nice buy! I've begun looking at for value in the retail space as well. Several of the staples, like Target and Walmart, seem to be have been unduly punished. The worst thing that can happen in the retail sector is to have people unemployed or poor......and unable to spend. Target and Walmart would be affected to a lesser degree however, because people do need to buy SOME things. I'm sure I'll be buying one or both in the coming months. Have a great night

    1. I tend to favor discount stores that can compete on price. Even if people are unemployed they will still need to eat and clothe themselves. Enter Walmart. If I was unemployed that's exactly where I'd shop. Food stamps and unemployment probably help Walmart sell more staples. Walmart performed just fine operationally during the great recession no doubt because of it's rock bottom price strategy.

      The one thing I'll always remember about Walmart- back in the day Big Red chewing gum sold for $.25 per pack and the price was clearly listed on the packaging. Walmart built its first store in my town and sold those packs of gum for $.20 (less than what the packaging said). I may have just been a kid but I was amazed!

  2. is giving an EOY 2014 estimate of $85 so you are spot on with yours. I am really waiting and hoping to see what happens with Walmart Express (Walgreens sized stores) and their Walmart Neighborhood Market (just a grocery store and smaller size). Their plan couple years ago was to use the Walmart Supercenters as local warehouses and overstock them to the ceiling. Then the Markets and Expresses would place an order and pick them up locally. The big warehouses and their fleet of trucks would be limited to the supercenters.
    It takes time to work something like that out but I would expect they would start rolling it out soon. Course their employee staffing problems in not being able to get things stocked is going to hurt them. I don't expect them to get paid $15/hour but certainly more then minimum wage. $10 would be better.

    1. Hmm it's nice to know my calculations aren't completely off. I calculate fair value using my own method and it seems to have worked pretty well the past couple years. I do like FAST graphs and have used the service from time to time, usually if I'm too busy to do my own valuations. Morningstar's fair value calculation technique seems pretty reasonable as well, but I do not know how it's calculated.

      During the government shutdown a few months back I visited a Neighborhood Walmart and was thoroughly impressed. Those ought to do pretty well. I have never seen a Walmart Express, but if I happen to see one I'll stop to take a look.

      Thanks for sharing your thoughts!

  3. As with Fast Weekly, I think both WMT and TGT represent some opportunity in the market. Nice work on getting some WMT at better than fair value.

    1. I hope to grab some more WMT/TGT shares next month, we'll see. UL needs a boost, PM looks good, I'm highly interested in ABT, WTR is a new one I want to add. My resources are limited, cannot buy everything!

  4. I really like wmt at theses prices. nice pick up.

  5. I like WMT here as well as KO and PM. The PM selloff has been pretty hard. I'm hoping to pick up some more WMT to bring it closer to equal weighting with TGT. The selloff to start the year couldn't have come at a worse time as a rental property is high on my list for the year too. But you have to take value when you can so I've been nibbling here and there.

    1. I think we're both in this for the long term, fluctuations like this aren't a big deal even if you have cash set aside for other things. Maybe the markets continue to slide and you'll be glad you didn't buy now. Never know...

      I'm hoping to score extra WMT shares in February, but TGT also looks good.