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Where Is Walmart’s Dividend Yield Heading?

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Wal-Mart Stores’ net sales and EPS growth

Walmart’s (WMT) net sales rose 2% in 2015 before falling 1% in 2016. Comparable sales of Walmart US and Sam’s Club improved in 2015 before losing some of these gains in 2016. Gross margin expanded 2% and 0.5% in 2015 and 2016, respectively. The expansion was offset by an increase in the cost of sales in 2015 followed by a decline in 2016. Operating income rose 1% in 2015 before falling 11% in 2016. This fall was due to an increase in operating and SG&A expenses. As a result, EPS jumped 4% in 2015 before falling 10% in 2016. Interest expense rose during the periods and share buybacks boosted EPS numbers.

Net sales rose close to 1% in 2017 and 2% in 1H18. Comparable sales of Walmart US and Sam’s Club strengthened in 2017 before weakening slightly in 1H18. Gross margin expanded 3% in 2017 and 2% in 1H18 offset by an increase in the cost of sales during the period. Operating income fell 6% and 2% in 2017 and 1H18, respectively, offset by an increase in operating and SG&A during the period. Overall, the company’s EPS fell 4% and 10% in 2017 and 1H18, respectively. Interest expense fell in 2017 before increasing in 1H18. Share buybacks enhanced the EPS numbers.

Walmart’s dividend yield

Walmart’s dividend yield has fallen over the years due to slow growth in dividend and price gains. The stock’s present price is equivalent to its level in 2014. The company has maintained a very good free cash flow balance.

Walmart Stores has a dividend yield of 2.3% and a YTD price gain of 26.5%. Let’s compare that with the broad indexes. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has recorded a dividend yield of 2.3% and price gains of 18% on a YTD basis. The S&P 500 (SPX-INDEX) (SPY) has recorded a dividend yield of 2.3% and price gains of 15% on a YTD basis. The NASDAQ Composite (COMP-INDEX) (ONEQ) has recorded price gains of 23.2% on a YTD basis.

The PowerShares Dividend Achievers (PFM) is a dividend ETF with exposure to Walmart Stores. It has a dividend yield of 2.1% and a PE of 20.1x. Guggenheim Dow Jones Industrial Average Dividend ETF (DJD) is a dividend ETF with exposure to Walmart Stores. It has a dividend yield of 2.7% and a PE of 20.9x.

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