Yahoo Finance Walmart Inc. (NYSE:WMT) Passed Our Checks, And It's About To Pay A US$0.2075 Dividend
Walmart Inc. (NYSE:WMT) stock is about to trade ex-dividend in 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Walmart's shares before the 9th of May to receive the dividend, which will be paid on the 28th of May.
The company's next dividend payment will be US$0.2075 per share, on the back of last year when the company paid a total of US$0.83 to shareholders. Last year's total dividend payments show that Walmart has a trailing yield of 1.4% on the current share price of US$59.82. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Walmart can afford its dividend, and if the dividend could grow.
View our latest analysis for Walmart
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Walmart paying out a modest 40% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Walmart has grown its earnings rapidly, up 20% a year for the past five years. Walmart is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Walmart has delivered 2.6% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Walmart is keeping back more of its profits to grow the business.
To Sum It Up
Should investors buy Walmart for the upcoming dividend? Walmart has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Walmart looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while Walmart has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Walmart and you should be aware of this before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
