Wal-Mart Stores Inc. (NYSE: WMT) is the world's largest company in the discount variety stores industry, with a market cap of $231.57 billion. As of Aug. 22, 2016, Wal-Mart operated in 11,539 total retail units, with 2.3 million associates in 28 countries. Since its humble beginnings as a small variety store in 1950, Wal-Mart has grown into a company that generates an annual revenue of over $450 billion. It has consistently maintained its strong dividend policy over the past four decades, even in times of macroeconomic distress.
WMT Dividend History
Wal-Mart is considered a Standard & Poor's 500 Index (S&P 500) dividend aristocrat, due to its inclusion in the index and consecutive annual dividend raises for 43 years. It declared its first annual dividend in March 1974. Since then, Wal-Mart has raised its annual dividend every year until 2016, when it raised its annual dividend to $2.00 per share. Over the past five years, Wal-Mart raised its annual dividend at an average annual pace of over 10%. The company is expected to continue its dividend growth, and it is unlikely that it will tarnish its stellar reputation of consistently increasing dividends with dividend cuts within the short term.
2017 Fiscal-Year Dividend Raise and Payments
On Feb. 18, 2016, the company's board of directors approved an annual cash dividend raise to $2.00 per share during the 2017 fiscal year, a 2% increase from its annual dividend per share of $1.96 during the previous fiscal year. WMT will distribute its dividend in quarterly installments of 50 cents per share. Its first quarterly dividend payment for the 2017 fiscal year was declared on Feb. 18, 2016, and payable to investors listed as a holder of record on March 11, 2016. The first quarterly installment was distributed on April 4, 2016. Thereafter, the company distributed its second quarterly dividend payment on June 6, 2016, for investors of record on May 13, 2016. Wal-Mart will pay its third and fourth quarterly dividend installment on Sept. 6, 2016, and Jan. 3, 2017, respectively.
Dividend Payout Ratio
The dividend payout ratio is used to determine a company's ability to continue distributing dividends and whether it is likely to raise its annual dividend consistently. A low dividend payout ratio, when compared to a company's sector, is favorable and indicates that the company will likely raise its dividend. Wal-Mart reported its first-quarter 2017 fiscal-year earnings results in May 2016. Its earnings per share (EPS) was 98 cents. Consequently, it had a dividend payout ratio of 51%, which indicates that it is only paying out just over half of its EPS in the form of cash dividends. Wal-Mart reported an EPS of $1.21 during the second quarter of the 2017 fiscal year. Therefore, its dividend payout ratio decreased to 41.32% quarter over quarter.
WMT Dividend Yield and Stock Trend
In 2015, Wal-Mart lost over 25% of its market value and underperformed its industry and the S&P 500 Index by 12.19% and 27.72%, respectively. The company's significant drop in market value caused its dividend yield to trend upward until November 2015. However, it only raised its annual dividend by 4 cents over this period. Consequently, it had a trailing 12-month dividend yield of 2.15% on Jan. 9, 2015, which trended higher to 3.47% up until Nov. 13, 2015.
After bottoming out on Nov. 13, 2015, the company's stock price trended higher and caused its trailing 12-month dividend yield to fall below 3%. As of Aug. 22, 2016, WMT was up 21.04% year to date (YTD). Since its dividend yield hit a 52-week high of 3.47% due to the significant drop in its stock, WMT's dividend reversed and trended lower between November 2015 and August 2016. The company had a trailing 12-month dividend yield of 2.74% as of Aug. 22, 2016.
The Bottom Line
The S&P 500 dividend aristocrat has a strong dividend track record and dividend policy, and it may be an attractive stock for income investors. Since it is expected to report a full-year EPS between $4.15 and $4.35, its dividend payout ratio should be below 50% during the 2017 fiscal year. Consequently, WMT should raise its dividend next year, extending its track record to 44 consecutive years.