Walmart's (NYSE:WMT) Shareholders Will Receive A Bigger Dividend Than Last Year
The board of Walmart Inc. (NYSE:WMT) has announced that it will be increasing its dividend on the 6th of September to US$0.56. The announced payment will take the dividend yield to 1.9%, which is in line with the average for the industry.
Check out our latest analysis for Walmart
Walmart's Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Walmart was paying a whopping 197% as a dividend, but this only made up 35% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Over the next year, EPS is forecast to expand by 30.8%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.
Walmart Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$1.59 in 2012, and the most recent fiscal year payment was US$2.24. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. Walmart hasn't seen much change in its earnings per share over the last five years. If Walmart is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Walmart will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 5 warning signs for Walmart that investors should take into consideration. Is Walmart not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
