Wednesday, February 24, 2016

Dividend Increase: WMT

Oh what a wonderful year it has been for the Cookie Jar so far and this month is no different. Although the market has recently seen some volatility, WMT again decided for the 43rd consecutive year to raise its dividends and guess who owns a nice little piece of WMT? We do! This means that without us lifting even the smallest amount of our fingers, we’ve effectively seen a raise from a great company that still shows support for its investors. Although the company itself has seem some slowing over the most recent years, they still show that they are a dividend paying contender.

With the most recent increase this month, WMT raised its annual dividend from $1.96/share to an even and very eye soothing $2/share. This amounts to a total increase of 2% and brings that consecutive increase as I said before to a total of 43 years straight of dividend raises. This means that it will effectively stay on the dividend aristocrat list for another year at the very least. Even though the company has definitely seen some troubles as of late, this shows that the company is still strong enough to make sure to pay the stock holders their well deserved credit for backing them. In addition, even though they just raised the dividend, they still find themselves underneath a total payout ratio of 50% and that means there is lots of room to move it upwards for many years to come.

The only thing that I worry about with Walmart is the prospective of the US on the stores themselves. Walmart has historically had trouble moving their retail business to an online model to keep up with increasing competition in the area by big names such as Amazon (God, I wish I owned a piece of Amazon!). If WMT can’t get a grip on this quickly, they may find that they become out dated and they will eventually bottom out and slid out of the market’s eye. That would be the worst case scenario. On the other hand, the company is still booming even though they face these problems because their stores in many places are the last line of stores in existence. In small towns, a Walmart is basically a one stop shop and can be the only choice of places to go because their low prices (due to bulk buy) have run out the competition. This means that even if they face issues with online retailers, there will still be a solid backbone in these areas that won’t be pushed out themselves without a lot of work on the part of the community supporting another mother or father store.

We will have to see where these changes lead but for now, I’ll be holding on to this dividend aristocrat because of the long standing payout and the minimal payout ratio. It’s a safe bet and the raises appear as if they have no halt in current view ahead. Thanks for reading and take care!

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