Wal-Mart (WMT) Analysis
Wal-Mart Stores, Inc. operates retail stores in various formats worldwide. The company is member of the S&P 500, Dow Jones Industrials Average and the S&P Dividend Aristocrats indexes. Wal-Mart Stores has consistently increased dividends every year for 35 years. The company announced a 15% dividend raise in March 2009, plus a $15 billion stock buyback initiative last month.
Between June of 1999 up until June 2009 this dividend growth stock has delivered an average total return of 1.10% annually. The stock is trading below the levels it was changing hands a decade ago.
The company has managed to deliver an 11.60% average annual increase in its EPS between 1999 and 2008. Next year Wal-Mart is expected to earn $3.55 share, followed by $3.90/share in FY 2011. With growth slowing down, the price/earnings multiple could contract even lower. This being said I believe Wal-Mart is an excellent business, as it always investing in innovation that helps control inventory and focus on certain types of merchandise that offsets weaker demand in recessions. Despite the expected slow down in consumer spending, Wal Mart is well positioned with its diverse product mix of consumer staples and foods that it is offering on its shelves. It has lower prices in comparison to its competitors, which could drive more traffic for the retailer.
Just like Walgreen (WAG), Wal-Mart Stores expects to slow down on the rate of opening new stores and instead would try to focus on developing the profitability of existing locations, without cannibalizing sales in its existing outlets.
A potential growth area for the company are its international joint ventures in China, Brazil, India and Chile. Continue Reading...