Retail stock Walmart (WMT) is the quintessential capitalist success story. Founded by Sam Walton in 1962 as just a mom-and-pop retail store in a small Arkansas town, Walmart has managed to grow into the biggest retailer on the planet. As king of the retail sector, Walmart serves more than 200 million customers a week at more than 8,000 affiliated stores worldwide.
But the question for investors is not how successful the company has been, but whether its shares represent a sound investment right now. The answer is yes – and here are five reasons why you should buy WMT stock:
- Walmart posts strong earnings: In February, Walmart reported fourth quarter earnings of $1.17 per share, 5 cents better than the consensus estimate for earnings of $1.12. Top-line numbers also impressed, rising 4.5% year-over-year to $113.65 billion, though the revenue numbers were just shy of earnings estimates. Though the company did offer a cautious outlook for Q1 and the full year ahead, its forecast was in line with analysts’ estimates.
- A high dividend yield stock: On March 4, Walmart announced it was increasing its annual dividend by 11% to $1.21 a share in 2011, from $1.09 per share paid during the fiscal 2010. The beefed up annual dividend of $1.21 will be paid in four quarterly installments of 30.25 cents a share. This high dividend yield is great for investor who are looking for a quarterly dividend check in addition to share appreciation.
- WMT stock isn’t overpriced: Walmart shares currently trade at price-to-earnings ratio, or P/E, of just under 15, and a forward P/E of 13, both well below retail industry averages. Also, the shares enjoy the widespread approval of analysts following the company. Of the 24 analysts who cover Walmart, nearly 80% recommend the stock. Moreover, the mean analyst price target for the shares over the next 12 months is $62.13 – a double-digit premium on prices as of this writing.
- Improving retail sales conditions: Moody’s Investors Service recently upgraded the retail sector at large, saying that it expects credit conditions to improve for the industry over the next 12 to 18 months. Moody’s also expects operating income in the sector to grow, driven largely by continued cost cutting efforts and improved consumer spending. According to Moody’s, discount stores were among the most stable segments in the retail space.
- Walmart cashing in on international growth: While consumers in the U.S. are starting to spend more, the real growth action is overseas, particularly in emerging markets. Walmart currently gets about 20% to 25% of its business outside the U.S., and that mix is growing by about 15% a year. The company continues expanding into red-hot markets like China, and that means increased revenue in the months and years to come.
- Walmart (WMT) Lowers Prices to Lure Customers
- Retail Sales Rising (TGT, WMT, COST)
- Stock Upgrades: COST, LLY, RDS, WMT
Learn how to break down scientific chart analysis into easy-to-make trades that will have you trading, and profiting, with confidence in no time. This is your chance to leverage your profits 10 times larger with a tiny investment! Get your FREE trading guide here!