Recent Transfer: Wal-Mart Stores, Inc

Based in Bentonville, Arkansas, Wal-Mart Stores, Inc (WMT) is the world's largest retailer and private employer, with over two million employees. The company is a multinational retailer consisting of more than 11,500 stores under 63 banners in 28 countries. WMT was founded in 1945.

WMT is a Dividend Champion with an impressive streak of 43 years of dividend increases. It pays quarterly dividends in January, April, July, and October. The current dividend is 50¢ per share, so WMT yields 2.98% at the recent share price of $67.13.

WMT's dividend growth is slowing. The stock's 10-year dividend growth rate is solid at 11.8%, but its 5-year, 3-year, and 1-year dividend growth rates tell a sorry tale: 7.3%, 3.3%, and 2.1%, respectively.

Background

I'm taking more consolidation actions, essentially bringing the holdings of four additional IRA's into the DivGro fold. When completed, DivGro will be distributed over five different accounts, one trust account at Interactive Brokers and four IRA's at FolioInvesting.

The first action I'd like to report is transferring my IRA from Wells Fargo to FolioInvesting. This is a traditional IRA opened in April 2008. I'm retaining two holdings, WMT and Microsoft Corporation (MSFT), and transferring the remaining account value in cash.

The goal of this post is to create a record of past transactions and dividends received for the WMT position. I'll also share my reasons for holding onto this WMT position.

Transactions

I bought 9 shares of WMT shortly after opening my IRA in 2008. The initial yield on cost (YoC) was uninspiring at 1.65%, but the shares now have a YoC of 3.47%. Despite the small dividend, it sure adds up over time! Total dividends received divided by the total capital invested, the so-called payback, is 24.3%:

2008-04-29	Bought 9 shares of WMT at $56.96 per share:	$	512.57
2008-06-02	Dividend on 9 shares at 23.75¢ per share:	$	2.14
2008-09-02	Dividend on 9 shares at 23.75¢ per share:	$	2.14
2009-01-02	Dividend on 9 shares at 23.75¢ per share:	$	2.14
2009-04-06	Dividend on 9 shares at 27.50¢ per share:	$	2.48
2009-06-01	Dividend on 9 shares at 27.50¢ per share:	$	2.48
2009-09-08	Dividend on 9 shares at 27.50¢ per share:	$	2.48
2010-01-04	Dividend on 9 shares at 27.50¢ per share:	$	2.48
2010-03-12	Dividend on 9 shares at 30.25¢ per share:	$	2.72
2010-06-01	Dividend on 9 shares at 30.25¢ per share:	$	2.72
2010-09-07	Dividend on 9 shares at 30.25¢ per share:	$	2.72
2011-01-03	Dividend on 9 shares at 30.25¢ per share:	$	2.72
2011-04-04	Dividend on 9 shares at 36.50¢ per share:	$	3.29
2011-06-06	Dividend on 9 shares at 36.50¢ per share:	$	3.29
2011-09-06	Dividend on 9 shares at 36.50¢ per share:	$	3.29
2012-01-03	Dividend on 9 shares at 36.50¢ per share:	$	3.29
2012-04-04	Dividend on 9 shares at 39.75¢ per share:	$	3.58
2012-06-04	Dividend on 9 shares at 39.75¢ per share:	$	3.58
2012-09-04	Dividend on 9 shares at 39.75¢ per share:	$	3.58
2012-12-27	Dividend on 9 shares at 39.75¢ per share:	$	3.58
2013-04-01	Dividend on 9 shares at 47.00¢ per share:	$	4.23
2013-06-03	Dividend on 9 shares at 47.00¢ per share:	$	4.23
2013-09-03	Dividend on 9 shares at 47.00¢ per share:	$	4.23
2014-01-02	Dividend on 9 shares at 47.00¢ per share:	$	4.23
2014-04-01	Dividend on 9 shares at 48.00¢ per share:	$	4.32
2014-06-02	Dividend on 9 shares at 48.00¢ per share:	$	4.32
2014-09-03	Dividend on 9 shares at 48.00¢ per share:	$	4.32
2015-01-05	Dividend on 9 shares at 48.00¢ per share:	$	4.32
2015-04-06	Dividend on 9 shares at 49.00¢ per share:	$	4.41
2015-06-01	Dividend on 9 shares at 49.00¢ per share:	$	4.41
2015-09-08	Dividend on 9 shares at 49.00¢ per share:	$	4.41
2016-01-04	Dividend on 9 shares at 49.00¢ per share:	$	4.41
2016-04-04	Dividend on 9 shares at 50.00¢ per share:	$	4.50
2016-06-06	Dividend on 9 shares at 50.00¢ per share:	$	4.50
2016-09-06	Dividend on 9 shares at 50.00¢ per share:	$	4.50
2017-01-04	Dividend on 9 shares at 50.00¢ per share:	$	4.50
	Total capital invested:	$	512.57
	Total dividends received:	$	124.54
	Commissions/fees/taxes:	$	6.00

With this transfer, DivGro's projected annual dividend income (PADI) increases by $18 and I'm adding $124.54 in past dividends to DivGro's total dividend income.

After adding these shares to my existing WMT holding, I now own 78 shares at an average cost basis of $67.13, while the average YoC of these shares is 3.61%.

Here is a price history chart showing my buy prices and the average cost basis (pink line):

Fair Value Estimates

My fair value estimate of WMT is $71.71.

In comparison, Morningstar's fair value estimate is $76.00, Finbox.io's fair value estimate is $79.30, and Tipranks' average price target is $78.10. Simply Wall St's estimate based on a discounted cash flow analysis is $74.84.

Finbox.io presents a complete breakdown of its fair value estimate as well as range visualizers, not only for its own range of estimates but also for Wall Street analysts' targets and the stock's 52-week trading range (see below, left).

I like Simply Wall St's snowflake graphic, which presents a visual summary of a stock's fundamentals and investment profile. You can read more about the company's analysis model at Github.

I also use F.A.S.T. Graphs, a fundamentals analysis tool that correlates earnings and market price. In the following 10-year chart for WMT, there is a visible correlation between the price (black line) and earnings (orange line). Two years of future earnings estimates are included, indicating a price target of $68.40 by January 2019.

Ratings and Rankings

I rate stocks using fundamental data and by considering certain stock selection criteria. My latest rating gives WMT five out of seven stars: ★★★★★☆☆

I also rank the stocks in my DivGro portfolio every month. December's ranking of WMT placed the stock at #22 out of 43 stocks.

Recently, I wrote two articles presenting the top holdings of dividend ETFs and the top holdings of dividend growth bloggers (2017 edition). WMT is the ranked #8 among dividend stocks held in dividend ETFs and is ranked #16 among dividend growth stocks held by dividend growth bloggers:

Top Holdings of Dividend ETFs	Top Holdings of DG Bloggers
WMT ranked #8	WMT ranked #16

In my stock analyses, I reference ratings and rankings of several online sources, including those I'm subscribed to. See my Ratings page for descriptions of these systems.

Here are updated ratings and rankings for WMT (as of 14 January 2017):

DARS Rating:    Highly Recommended (3.75 to 5.0)  Rating for Stocks:   ★★★★☆ STARS and Quality Ranking:       Quality Ranking:  A  Quant Rating:  Analyst Consensus:    (10 Analysts)  Rating and Rank:    Financial Strength:       Safety:    Rank and Style Scores:    3-Hold     †VGM:

†VGM Style:  Value   Growth   Momentum  and  combined VGM  score

Risks 

WMT is facing intense competition from dollar stores, traditional grocery chain stores, and especially online businesses. The company is countering with an aggressive enhancement of its e-commerce business, by expanding the number of mid-sized neighborhood markets, and through its price matching initiative.

The stronger dollar, soft economic conditions, and price competition are impacting WMT's international operations. International revenues are down for six quarters running, with Q3-2017 sales decreasing 4.8%.

If president Trump follows through on campaign promises and imposes sizable tariffs on imported goods, WMT's business model of providing low prices could be severely challenged.

Other risks include deflationary pressure, especially food deflation; macroeconomic factors such as interest rate hikes, unemployment, fuel and energy costs, credit availability and household debt; and media scrutiny, including labor disputes, bribery allegations, and food safety issues in China.

Reasons to Hold WMT

WMT has a very wide economic moat. With annual revenues easily outpacing the total revenues of Amazon.com Inc (AMZN), Target Corporation (TGT), and Costco Wholesale Corporation (COST), the company's massive scale and volume purchasing power allows it to drive down costs.

WMT regularly returns value to shareholders. In Q3-2017, it paid about $1.5 billion in dividends and repurchased 19.6 million shares for about $1.4 billion. Through October 2016, the company has returned $10.9 billion to shareholders and has utilized about $8.7 billion of its $20 billion share repurchase program.

WMT's quarterly dividend of 50¢ per share represents a yield of nearly 3%. The company has increased its dividend for 43 straight years. While the 10-year dividend growth rate is 11.8%, dividend growth has slowed down in recent years, with penny-raises for three years running.

One reason for smaller dividend increases is WMT's 3-year growth plan, which aims to deliver a seamless shopping experience at scale. The strategy includes expanding in-store, online, and mobile capabilities and aims to add between $45 billion and $60 billion in new sales on constant currency basis.

WMT's e-commerce sales surged 20.6% year-over-year in Q3-2017, an indication that the company's strategy to grow its online business is starting to pay off. Last year, WMT ranked second in e-commerce sales behind AMZN, according to a survey of 180 companies by eMarketer. While AMZN dominates with nearly $80 billion in e-commerce sales, or 74% of total sales, WMT's e-commerce sales of $13.5 billion represent only 2.8% of total sales, so WMT has lots of room to grow.

Last year, WMT acquired Jet.com for approximately $3 billion in cash and $300 million of WMT shares. The acquisition should help to accelerate the company's online sales. Earlier, WMT announced a strategic alliance with JD.com,  is China’s leading online direct sales company and the country’s largest Internet company by revenue.

Finally, as a defensive investment, WMT is a stock that provides recession-proof income. Its streak of 43 years of dividend increases shows that the company can withstand trying economic times.

Thanks for reading! Do you own shares of WMT or do you have plans to buy shares? Please let me know in the comments below.