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A Look at Walmart’s Shareholder Returns in 2015

Phalguni Soni

Will Walmart Beat Analyst Expectations, Earnings Outlook in 3Q16?

(Continued from Prior Part)

Walmart’s stock price performance in 2015

As a result of higher growth investments impacting its near-term earnings outlook, Walmart’s (WMT) stock price performance has been below par. The rise of the US dollar has also pressured Walmart’s results much more than its peers that have a retail (XLP) presence only in the United States.

Walmart’s stock price has fallen almost 33% since the start of 2015 and 13.7% since October 13, 2015, the day before its annual investor meeting.

Share repurchases

To counter some of the negative earnings impacts on shareholder returns, Walmart announced a new share buyback program worth $20 billion. It will be utilized over the next two years, deploying excess cash from operations. Walmart has repurchased shares worth more than $15 billion from fiscal 2012 to fiscal 2015. This year, Walmart has bought back shares worth $1.7 billion year-to-date.

Walmart has also announced an increase in its dividends to $1.96 per share in fiscal 2016, up 2.1% from the $1.92 per share paid out last year. Dividend aristocrat Walmart has raised its dividend for 42 consecutive years. Walmart makes up 1.2% of the portfolio holdings in the SPDR S&P Dividend ETF (SDY).

At a payout ratio of 40.4%, Walmart’s stock currently trades at a dividend yield of 3.4%, higher than fellow dividend aristocrat Target (TGT) at 2.8%. Walmart’s dividend yield is also higher than Kroger’s (KR) at 1% but lower than Costco’s (COST) at 4.2%.

Despite Walmart and Target having stellar dividend records, the potential for dividend growth may be higher for Target than for Walmart, at least in the near term. Target’s performance may also get a lift as its efforts to turn around operations and focus on the US market bear fruit. Target is also posting a recovery after sustaining massive losses on its Canadian operations.

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