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

Walmart Inc. (NYSE:WMT) has announced that it will be increasing its dividend on the 6th of September to US$0.56. This makes the dividend yield about the same as the industry average at 1.9%.

View our latest analysis for Walmart

Walmart's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last dividend, Walmart is earning enough to cover the payment, but the it makes up 196% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 30.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Walmart Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was US$1.59, compared to the most recent full-year payment of US$2.24. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

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. Unfortunately, Walmart's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Walmart is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Walmart's Dividend

Overall, we always like to see the dividend being raised, but we don't think Walmart will make a great income stock. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 5 warning signs for Walmart that investors should know about before committing capital to this stock. 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.