Friday, September 23, 2016

Assessing Walmart Stores Inc (WMT) as a recession proof dividend stock

Millions go to Walmart every day to buy their essentials, yet the same millions who are customers never think of becoming a shareholder of Wal-Mart Stores, Inc.

Walmart (WMT) as a stock is a recession proof dividend stock.

That does not mean that you do not have to pay attention to the price.  A low entry price will guarantee that you will make money just from the increasing dividend.

The following dividend detail is taken from Walmart website http://stock.walmart.com/investors/stock-information/dividend-history/default.aspx


Payable
Amount
Type
April 2, 2007
$0.22
Regular Cash
June 4, 2007
$0.22
Regular Cash
Sept. 4, 2007
$0.22
Regular Cash
Jan. 2, 2008
$0.22
Regular Cash
April 7, 2008
$0.24
Regular Cash
June 2, 2008
$0.24
Regular Cash
Sept. 2, 2008
$0.24
Regular Cash
Jan. 2, 2009
$0.24
Regular Cash
April 6, 2009
$0.28
Regular Cash
June 1, 2009
$0.28
Regular Cash
Sept. 8, 2009
$0.28
Regular Cash
Jan. 4, 2010
$0.28
Regular Cash
April 5, 2010
$0.30
Regular Cash
June 1, 2010
$0.30
Regular Cash
Sept. 7, 2010
$0.30
Regular Cash
Jan. 3, 2011
$0.30
Regular Cash
April 4, 2011
$0.37
Regular Cash
June 6, 2011
$0.37
Regular Cash
Sept. 6, 2011
$0.37
Regular Cash
Jan. 3, 2012
$0.37
Regular Cash
April 4, 2012
$0.40
Regular Cash 
June 4, 2012
$0.40
Regular Cash
Sept. 4, 2012
$0.40
Regular Cash
Dec. 27, 2012
$0.40
Regular Cash
April 1, 2013
$0.47
Regular Cash
June 3, 2013
$0.47
Regular Cash
Sept. 3, 2013
$0.47
Regular Cash
Jan. 2, 2014
$0.47
Regular Cash
April 1, 2014
$0.48
Regular Cash
June 2, 2014
$0.48
Regular Cash
Sept. 3, 2014
$0.48
Regular Cash
Jan. 5, 2015
$0.48
Regular Cash
April 6, 2015
$0.49
Regular Cash
June 1, 2015
$0.49
Regular Cash
Sep. 8, 2015
$0.49
Regular Cash
Jan. 4, 2016
$0.49
Regular Cash
I do not take the whole dividend history since that will take up too much space.

From the dividend history from 2007 onwards, we can see that Wal-Mart Stores, Inc pays dividend every quarter, even in the worse year of the recession.

We can reasonably conclude that in the coming years when there is a deep recession again, Walmart will continue to pay dividend.

In fact, the business will boom because more people will cook at home, and they will cut down on overseas travel, and spend more money on essentials, and grocery.

For me personally, I prefer to have a buying price and a selling price before I buy any stock.

In the case of Walmart, I will use a dividend yield of 4% to set my minimum price.

Taking the full year dividend payout for financial year 2015, the dividend amount is $0.49 x  4, which is $1.96.

$1.96 divided by 4% will give me a buying price of $49.  Walmart has increased the dividend to 50 cents per quarter for the current year.  At the rate of 4% yield, my buying price will be $50.

The current price is $72 which is way too high a price for me. 

There were a few days in 2007 to 2010 when the share price of Walmart was below $50.

That means if I were to buy the stock of this company, I would have to wait patiently for the next recession to cause a market crash.

As for the selling price, I would set it based on dividend yield.  Anytime when the share price reaches sky high and the dividend is not increasing at the same rate, I will sell.

My selling price will be based on a dividend yield of 2%.  At the current annual dividend of $2, my selling price will be $100.

In a nutshell, my buying price is $50 and selling price is $100 based on the current year dividend.


When the dividend increases, my buying price and selling price will change based on dividend yield of 4% to set a buying price and 2% to set selling price.  

No comments:

Post a Comment