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

July 02, 2022
  •  Updated
August 05, 2022
NYSE:WMT
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The board of 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 1.8%.

Check out our latest analysis for Walmart

Walmart's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. 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.

Over the next year, EPS is forecast to expand by 30.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

historic-dividend
NYSE:WMT Historic Dividend July 2nd 2022

Walmart Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the dividend has gone from US$1.59 to US$2.24. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Walmart hasn't seen much change in its earnings per share over the last five years. The company has been growing at a pretty soft 1.4% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

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. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 5 warning signs for Walmart that you should be aware of before investing. Is Walmart not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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