Friday, March 2, 2012

KA-CHING! Wal-mart just gave me a 9% raise

Wal-mart (WMT) announced on Thursday that it was raising its yearly dividend from $1.46 to $1.59, a 9% increase.  WMT has raised its dividend every year since it first declared a dividend of 5 cents per share in 1974.  Between share buybacks and dividends, WMT returned $11.3 billion to shareholders last year.

This most recent bump follows a dividend increase of over 20% last year.  Although I was expecting a double-digit dividend increase again this year, I am happy with the 9% raise.  WMT decreased prices this past holiday season in order to bring back customers it had previously lost.  The price decrease generated more business, but hurt their profit margins in the near-term.  I believe this decrease in margins is the reason we did not see 10%+ increase.

Going forward, it appears that WMT has high expectations for the current fiscal year.  The core Walmart U.S. business is "back on track," according to Chief Executive Mike Duke.  With its relatively low free cash flow payout ratio and debt to total capital, I believe WMT will be able to continue raising its payout in line or above its income growth rate in the coming years.  WMT's international business is still growing and the Sam's Club warehouse chain has also done well. WMT continues to invest in areas such as e-commerce, where it trails market leader Inc, and needs to cut costs to keep its prices low in the United States.

When was the last time you got a 9% raise at your job?  WMT just rewarded me with one and I didn't have to do a thing.  Now I get 9% more stock each time my dividends reinvest, which will get me more dividends, which will get me even more stock... well, you get the point.

Disclosure:  Long WMT

Tags: [WMT]

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