Use access key #2 to skip to page content.

Dividends4Life (42.06)

April 2011

Recs

10

Wal-Mart Stores, Inc. (WMT) Dividend Stock Analysis

April 28, 2011 – Comments (0) | RELATED TICKERS: WMT , COST , TGT

Linked here is a detailed quantitative analysis of Wal-Mart Stores, Inc. (WMT). Below are some highlights from the above linked analysis:

Company Description: Wal-Mart Stores, Inc. is the largest retailer in North America and operates a chain of discount department stores, wholesale clubs, and combination discount stores and supermarkets.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

WMT is trading at a discount to 1.) and 2.) above. The stock is trading at a 24.3% discount to its calculated fair value of $70.69. WMT earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

WMT earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. WMT earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 37 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

WMT earned a Star in this section for its NPV MMA Diff. of the $3,195. This amount is in excess of the $500 target I look for in a stock that has increased dividends as long as WMT has. If WMT grows its dividend at 13.3% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. WMT earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.

Memberships and Peers: WMT is a member of the S&P 500, a Dividend Aristocrat and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Costco Wholesale Corporation (COST) with a 1.1% yield, Target Corp. (TGT) with a 2.0% yield and PriceSmart Inc. (PSMT) with a 1.6% yield.

Conclusion: WMT earned one Star in the Fair Value section, earned three Stars in the Dividend Analytical Data section and earned one Star in the Dividend Income vs. MMA section for a total of five Stars. This quantitatively ranks WMT as a 5 Star-Strong Buy.

Using my D4L-PreScreen.xls model, I determined the share price could increase to $100.04 before WMT's NPV MMA Differential decreased to the $500 minimum that I look for in a stock with 37 years of consecutive dividend increases. At that price the stock would yield 1.46%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 7.5%. This dividend growth rate is well below the 13.3% used in this analysis, thus providing margin of safety. WMT has a risk rating of 1.50 which classifies it as a Low risk stock.

WMT enjoys dominant positions in most markets where it competes. The company continues to gain market share aided by a slow economic recovery that continues to see consumers choosing WMT over higher-cost competitors. Its unmatched scale leads to favorable terms on everything from the products it sells to store leases and distribution agreements. I plan to continue adding to my position as my allocation allows and while the stock is trading below my fair value price of $70.69.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in WMT (3.9% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- Genuine Parts Company (GPC) Dividend Stock Analysis
- Microsoft Corporation (MSFT) Dividend Stock Analysis
- Cardinal Health,Inc. (CAH) Dividend Stock Analysis
- Walgreen Co. (WAG) Dividend Stock Analysis
- More Stock Analysis  [more]

Recs

11

10 Dividend Stocks For Healthy and Wealthy Retirement

April 26, 2011 – Comments (1) | RELATED TICKERS: PG , KO , AFL

Americans are worried that they might not have enough money for retirement. Women who outlive their husbands are at special risk, with 40 percent of widows living almost exclusively on Social Security. There are a lot of worried retirees out there.
  [more]

Recs

8

10 Dividend Stocks Paying More Cash

April 25, 2011 – Comments (0) | RELATED TICKERS: PPG , GE , SO

Payback is the amount of time needed for an investment to earn its cost, undiscounted. Though not very sophisticated, payback can still help you screen for good, solid dividend growth stocks. Once you earn back your investment, some might say you are in a no-lose situation. I wouldn’t go quite that far, but you have found an investment that has provided you a good historical revenue stream, and hopefully it will continue to do so in the future.  [more]

Recs

9

ConocoPhillips (COP) Dividend Stock Analysis

April 21, 2011 – Comments (0) | RELATED TICKERS: COP , CVX , XOM

Linked here is a detailed quantitative analysis of ConocoPhillips (COP). Below are some highlights from the above linked analysis:  [more]

Recs

13

15 Dividend Stocks With A 15% Yield In 15 Years

April 19, 2011 – Comments (0) | RELATED TICKERS: WAG , MCD , COP

"I skate to where the puck is going to be, not where it has been."
- Wayne Gretzky

I know very little about hockey, but I have always loved this quote. It can be applied to so many things in life, including investing. Just as Gretzky has a vision as to where the puck is going, investors need to have a similar vision, and not get caught up on short-sighted distractions. Investing in dividend growth stocks requires a long-term vision. It is easy to run a screen and find stocks that are paying a 15% yield today; but how long will they be able to sustain it? Instead you may want to skate to where the future 15% yielders are going to be. To do that, here are some things you need to know...
  [more]

Recs

10

8 Dividend Stocks For The Ultimate In Deferred Gratification

April 18, 2011 – Comments (0) | RELATED TICKERS: DOW , UTX , PG

Deferred gratification is a principle where one or more people choose to postpone near-term benefits in order to enhance their chances of greater benefits in the future. In our microwave society marked by the ‘I want it now’ attitude, it is unusual to find someone willing to wait. However, deferred gratification is essential for anyone wanting to build wealth and is a key ingredient in a successful dividend investing strategy.   [more]

Recs

11

Genuine Parts Company (GPC) Dividend Stock Analysis

April 14, 2011 – Comments (0) | RELATED TICKERS: GPC , AAP , AZO

Linked here is a detailed quantitative analysis of Genuine Parts Company (GPC). Below are some highlights from the above linked analysis:

Company Description: Genuine Parts Co is a leading wholesale distributor of automotive replacement parts, industrial parts and supplies, and office products.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

GPC is trading at a premium to all four valuations above. The stock is trading at a 14.6% premium to its calculated fair value of $46.81. GPC did not earn any Stars in this section.

Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

GPC earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. GPC earned a Star for having an acceptable score in at least two of the four Key Metrics measured. The company has paid a cash dividend to shareholders every year since 1948 and has increased its dividend payments for 55 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA)? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked PDF for a detailed description:

1. NPV MMA Diff.
2. Years to > MMA

The NPV MMA Diff. of the $386 is below the $500 target I look for in a stock that has increased dividends as long as GPC has. If GPC grows its dividend at 4.8% per year, it will take 4 years to equal a MMA yielding an estimated 20-year average rate of 3.9%. GPC earned a check for the Key Metric 'Years to >MMA' since its 4 years is less than the 5 year target.

Memberships and Peers: GPC is a member of the S&P 500 and a member of the Broad Dividend Achievers™ Index and a Dividend Champion. The company's peer group includes: Advance Auto Parts Inc. (AAP) with a 0.4% yield, AutoZone Inc. (AZO) with a 0.0% yield and W.W. Grainger, Inc. (GWW) with a 1.6% yield.

Conclusion: GPC did not earn any Stars in the Fair Value section, earned three Stars in the Dividend Analytical Data section and did not earn any Stars in the Dividend Income vs. MMA section for a total of three Stars. This quantitatively ranks GPC as a 3 Star-Hold.

Using my D4L-PreScreen.xls model, I determined the share price would need to decrease to $50.39 before GPC's NPV MMA Differential increased to the $500 minimum that I look for in a stock with 55 years of consecutive dividend increases. At that price the stock would yield 3.57%.

Resetting the D4L-PreScreen.xls model and solving for the dividend growth rate needed to generate the target $500 NPV MMA Differential, the calculated rate is 5.4%. This dividend growth rate is slightly above the 4.8% used in this analysis, thus providing no margin of safety. GPC has a risk rating of 1.25 which classifies it as a Low risk stock.

GPC’s long string of dividend increases are supported by its strong underlying fundamentals of sales, earnings and free cash flow growth. The company exhibits excellent financial leadership as evidenced perseverance through the recent downturn. From an operating standpoint, GPC has an extensive distribution network and it has built a loyal customer following over the years. Since the company is trading well above my buy price of $46.81 and slightly above the $50.39 maximum price supported by its dividend fundamentals, I will wait for a pullback before adding to my position.

Disclaimer: Material presented here is for informational purposes only. The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer for more information.

Full Disclosure: At the time of this writing, I was long in GPC (2.2% of my Income Portfolio). See a list of all my income holdings here.

Related Articles:
- Cardinal Health,Inc. (CAH) Dividend Stock Analysis
- Walgreen Co. (WAG) Dividend Stock Analysis
- Medtronic Inc. (MDT) Dividend Stock Analysis
- Weyco Group, Inc. (WEYS) Dividend Stock Analysis
- More Stock Analysis  [more]

Recs

10

10 Dividend Stocks With With A 10%+ Dividend Growth Rate

April 12, 2011 – Comments (0) | RELATED TICKERS: CL , COP , WMT

The difference between an income investor and a dividend growth investor is time and the understanding of how compound growth works. If you are 67 years old and need income today, you will likely select a different group of stocks than an enlightened 27 year old that doesn’t necessarily need the income today. The 27 year old has the the luxury of time to grow a superior yield, while the 67 year old may be forced to assume additional risk to buy a higher current yield. Here are some of the reasons an investor might forgo current yield in hopes of future gain…  [more]

Recs

8

6 Dividend Stocks Building Shareholder Returns

April 11, 2011 – Comments (0) | RELATED TICKERS: PNC , SKT , TJX

Numerous research projects have shown, a conservative dividend growth based investment strategy has consistently outperformed the market over time. My goal as a dividend growth investor is to build a steadily increasing income and not necessarily to outperform the market via capital gains. But given the choice, I certainty don’t mind having both.

Below are several dividend stocks building shareholder returns with higher cash dividends:  [more]

Recs

10

Microsoft Corporation (MSFT) Dividend Stock Analysis

April 07, 2011 – Comments (0) | RELATED TICKERS: AAPL , GOOGL , MSFT

Linked here is a detailed quantitative analysis of Microsoft Corporation (MSFT). Below are some highlights from the above linked analysis:

Company Description: Microsoft is the world’s largest software company, develops PC software, including the Windows operating system and the Office application suite.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:  [more]

Recs

26

Why Dividend Stocks Are Evil

April 05, 2011 – Comments (5) | RELATED TICKERS: ABT , COP , PEP

I can’t carry on anymore. The secret has become too much of a burden and it must be shared with the masses. This will shock some and enrage others, but it must be said, and I should be the one to say it. Dividend stocks are evil and they will eventually lead to the collapse of western civilization as we know it. There, I said it and here is why I believe it…   [more]

Recs

8

1 Company Announced A Higher Dividend, 7 To Pay Higher Dividends in April

April 04, 2011 – Comments (0) | RELATED TICKERS: IP , KO , WMT

A stock with a high yield doesn’t mean much if the dividend is cut or eliminated, and the stock price declines significantly. Sometimes it is desirable to accept higher risk for a higher yield. Other times we may be accepting higher risk and are not being adequately compensated for the additional risk. One measure of dividend sustainability is the ability of management to consistently raise their dividends each year.

This week only one company announced raised the dividend growth bar one year by increasing its cash dividends paid:  [more]

Featured Broker Partners


Advertisement