Loading...
 

Since its doors first opened in 1962, Wal-Mart (WMT - Free Wal-Mart Stock Report) has expanded to become the world’s largest retailer. Today, the behemoth’s "Every Day Low Prices motif" is ubiquitously known among the value conscious. But does WMT stock offer similar value to investors?

Using the VL Page_GraphThose unnerved by fickle market gyrations will be eased by the sturdy nature a rock-solid company like Wal-Mart provides. A look at the Graph will show that the market price for this issue has demonstrated extraordinarily little fluctuation throughout the span of the last decade. We also note that the shares held up remarkably well during the financial crisis of 2008-2009 (recessions are shaded in gray).  It would appear that this company is built to weather the storms. Furthermore, with a miniscule Beta coefficient of .60 (located in the Ranks box), this stock tends to be much less volatile than the market as a whole.

Directly above the graph, the Top Label highlights the dividend yield at the time we went to press with the report. On one hand, at 2.3%, the payout stood moderately above the median yield of all dividend payers under coverage in The Value Line Investment Survey. On the other, that yield is mundane versus the average Dow component. But yield only tells us part of the dividend story.

Another key metric that demands the attention of income and buy-and-hold investors is the dividend-growth rate. In a mature company such as this, one should seek a history of consistent and meaningful dividend hikes. Turning our attention to the Statistical Array, we note that Wal-Mart has raised its dividend annually for every year presented. In fact, the company has done so for the last 41 consecutive years, an admirable record extending far beyond the scope of our page.

Using the VL Page_Quarterly EPS BoxBut perhaps not all is well. The Quarterly Sales and Earnings Per Share boxes show that top- and bottom-line growth have slowed over the last few years, as did dividend growth. The company has taken a conservative route recently with its dividend strategy, raising the distribution only 2% in 2014. Recently, management announced an increase of 2% for 2015, as well. Although Wal-Mart is maintaining its steadfast commitment to increases, these modest raises likely spooked some dividend growth accounts. Still, the blue chip is unlikely to break its streak of annual increases, and when earnings growth returns, we are confident that dividend growth will accelerate in concert.

Elsewhere on the page, the Ratings box provides other useful information. Based on factors like capital structure and liquidity, Wal-Mart earns a Financial Strength score of A++, our highest designation. The stock also garners our top marks for Price Stability and Earnings Predictability. These barometers of risk indicate that Wal-Mart is on particularly sure footing. While predictability and certainty is appreciated by conservative accounts, a high Price Growth Persistence mark may more predominantly attract those willing to accept some degree of risk for a better chance of meaningful price appreciation. Unfortunately, the Price Growth Persistence score of merely 55 out of 100 may leave some wanting.

While Wal-Mart stock merits appeal as an anchor of a conservative portfolio, growth oriented momentum accounts are unlikely to be among the enthused. Based on our proprietary Using the VL Page_Timeliness Ranks BoxTimeliness Ranking System (Ranks box), this equity is projected to lag the market in six- to 12 month price performance.

Wal-Mart recently made waves when it announced it would be raising the pay for about 500,000 of its associates. The public receives such news well, and has long been clamoring for this company, as well as certain other multinational companies, to increase pay for its lower-wage workforce. This beneficial PR move should also improve employee morale. But what pleases the public can rattle investors. Actually, a keystone of the company’s strategy since its inception has been low prices, facilitated by low costs. Raising salaries affects the company’s profit margins and bottom-line performance. Conversely, if it enables lower turnover, as is desired by management, then training expenses can be reduced, thereby recouping some of the expense. Although we wonder if the wage hikes will jeopardize its cost effective business model, any effort to improve a shopper’s experience is a well-intentioned endeavor.

All things considered, there are likely better alternatives for investors’ funds at this juncture. Although Wal-Mart has done a magnificent job of setting itself apart from the competition over the years, there is little to suggest that its shares are a superior investment to competitors’ such as Amazon.com (AMZN), Costco (COST), and Target (TGT) at this time.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.