Company Overview
Walmart (NYSE: WMT) is the world’s largest retailer. Wmt serves customers and members more than 200 million times per week at more than 8,613 retail units under 55 different banners in 15 countries, and employs 2 million people worldwide.
Founded in 1962 by Sam Walton in Rogers, Arkansas, it has grown into the largest company in the world. The chain consists of two segments, Walmart and Sam’s Club. Walmart is the retail side, and encompasses Walmarts, Walmart Super Centers, Walmart Neighborhood Markets, Marketside, and Walmart.com. Sam’s Club is the retail warehouse club, and makes the majority of it’s money off of membership fees, as it basically sells it’s goods with no mark-up.
The companies logistics and distribution system are unmatched. Wmt has one of the largest private distribution operations in the world, with have more than 40 Regional Distribution Centers. Each one is over 1 million square feet in size. They operate 24/7 to keep the fleet of tractors and trailers rolling. Inside each DC, more than five miles of conveyor belts move over 9,000 different lines of merchandise. Each DC supports between 75 and 100 stores within a 250-mile radius. Their system is so strong that the US government turned to them to help bring supplies to an underwater New Orleans after Hurrican Katrina.
In 1991 Wmt went international. They now have 4,230 stores and more than 660,000 associates in 15 countries outside the continental U.S., making their international operations the fastest growing part of their company. Of these stores, 75% of them operate under a different banner than Walmart.
In the recent news, Wmt has named a new CFO (Charles Holley), introduced a new, inexpensive prescription plan in conjunction with Humera that covers Medicare Part D, and put in a bid to buy Massmart, the largest retail chain in Africa.
Financial Analysis
Dividends
Wmt paid it’s first dividend of 0.05 per share in 1974. Wmt has paid an increasing dividend every year since.
| Dividend Growth | CAGR |
| 10 year | 18.11% |
| 5 year | 16.10% |
| 1 year | 14.74% |
| Payout Ratios | 2009 | 10 yr Avg. |
| EPS | 29% | 22% |
| Cash | 30.05% | 54.87% |
The dividend growth has been amazing, and though it is not increasing, this is to be expected for such a large dividend. It is harder to increase a $1.00 dividend by 10% than a $0.15 dividend.
Still, the consistency and percentage increase has been great.
Income Statement
| Revenue Growth | CAGR | EPS Growth | CAGR |
| 10 year | 8.57% | 10 year | 11.28% |
| 5 year | 6.94% | 5 year | 8.40% |
| 1 year | 0.95% | 1 year | 9.14% |
| Margins | 10 yr Avg. |
| Operating | 5.83% |
| Net | 3.40% |
Considering the past decade, the fact they are still increasing revenue and EPS is a good sign. Margins are low, but that is to be expected from a retailer.
In this time, Wmt has bought back shares at a clip of 3.5% a year. I love that they are focusing more on increasing dividends than buying back shares.
Balance Sheet
| Balance Sheet Ratios | 2009 | 10 yr Avg. |
| Current Ratio | 0.87 | 0.91 |
| Lg T Debt / Equity | 0.46 | 0.44 |
| Tot Debt / Equity | 0.52 | 0.57 |
| Debt / Total Capital | 34.14% | 36.44% |
| Cash Return / Tot Capital | 12.7% | 6.25% |
Cash Flow
| Free Cash Flow | CAGR | FCF Per Share | CAGR |
| 10 year | 27.35% | 10 year | 29.40% |
| 5 year | 39.53% | 5 year | 42.25% |
| 1year | 20.75% | 1 year | 23.06% |
Stock Price
| Current Price | 53.41 |
| P/E | 14.44 |
| Est Forward P/E | 13.29 |
| Div Yield | 2.04% |
| NPV | 41.1 |
| Book Value | 18.81 |
| Int. Value | 160.80 |
| | High P/E | Low P/E | High Yield | Low Yield |
| 10 year | 26.99 | 19.62 | 1.34% | 1.02% |
| 5 year | 18.09 | 14.01 | 1.93% | 1.50% |
Conclusion
Walmart has all the makings of a dividend king. A long history of increasing dividends, a double-digit growth rate, and family wealth that is heavily invested in the company stock. Increasing sales and earnings, buying back shares, and a heavy international presence.
The company is the world’s retailer, and they have not shown any indication this is slowing. They are placing huge bets on emerging economies, including Africa and South America. They have low debt, steady margins, and great cash flow.
The price is currently at a ttm p/e of 14.44, and a forward p/e of 13.29. The yield is slightly lower than I look for, but their stellar dividend growth rate will even that out. It is trading above my calculated npv, but I only use this as a gauge and not as a panacea.
As if all this weren’t enough, the one and only Warren Buffet has been a long time Walmart shareholder. I will continue to add to my position at this price.
Full Disclosure: Long on WMT
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