Walmart (NYSE:WMT) Is Increasing Its Dividend To $0.56

Walmart Inc. (NYSE:WMT) will increase its dividend from last year's comparable payment on the 3rd of January to $0.56. This makes the dividend yield about the same as the industry average at 1.6%.

View our latest analysis for Walmart

Walmart's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last payment was quite easily covered by earnings, but it made up 113% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 50.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Walmart Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $1.59 in 2012, and the most recent fiscal year payment was $2.24. This means that it has been growing its distributions at 3.5% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Walmart May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Walmart has only grown its earnings per share at 3.9% per annum over the past five years. Growth of 3.9% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Walmart's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Walmart is earning enough to cover the payments, the cash flows are lacking. We don't think Walmart is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Walmart that investors should take into consideration. Is Walmart not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.