Recent Buy

buyI’ve never felt more excited to reach financial independence than I do right now. And I’ve never felt more aggressive. I’m pushing my snowball harder and faster than ever, as evidenced by my recent actions. This transaction was just more of the same.

Retailing isn’t my favorite industry due to low margins and fierce competition, but there are a few really high-quality retailers that stand out. The world’s largest (by far) retailer is certainly one that stands head and shoulders above the rest, and I’m okay with standing on the shoulders of a giant. Especially a really profitable giant.

I purchased 7 shares of Wal-Mart Stores, Inc. (WMT) on 6/12/15 for $72.48 per share.

Overview

Founded in 1945, Wal-Mart Stores, Inc. is the world’s largest retailer, operating more than 11,000 stores across across 27 countries that serve more than 250 million customers weekly.

They operate through supercenters, wholesale clubs, and Neighborhood Markets, in addition to e-commerce.

The company is the largest publicly traded company in the world by revenue and also the world’s largest private employer.

There are three reportable segments: Walmart U.S. (60% of fiscal year 2015 sales), Walmart International (28%), and Sam’s Club (12%).

Fundamentals

Wal-Mart operates in superlatives. They are “the world’s largest” in a number of different categories. As such, due to the law of large numbers, a company this large isn’t really expected to grow very quickly. Yet they’re actually holding their own.

From FY 2006 to FY 2015, revenue increased from $315.654 billion to $485.651 billion. Huge numbers here. Revenue grew at a compound annual rate of 4.90% over that period, which is pretty impressive when we’re talking about coming off of a base of over $300 billion.

Meanwhile, earnings per share increased from $2.68 to $5.05 over the last decade, which is a CAGR of 7.29%. I think long-term EPS growth over 7% for a company this large is really rather incredible. However, EPS growth over the last three fiscal years has slowed markedly.

Substantial share repurchases helped the bottom line, and will likely continue to do so. Over the aforementioned time frame, WMT bought back over 900 million shares and reduced the outstanding share count by approximately 22%. This activity will likely continue for the foreseeable future: As of January 31, 2015, $10.3 billion remained on the current $15 billion share repurchase program.

S&P Capital IQ is calling for 7% compound annual growth in EPS over the next three years, which is in line with what we see above.

Now, where WMT shines extremely bright is in regards to their dividend history. Serving millions of customers every day and registering sales of almost $500 billion is all fine and dandy, but, as a part owner and business partner, I want my fair share of profit via a growing dividend.

Well, WMT doesn’t disappoint here.

They’ve increased their dividend for the past 42 consecutive years. That period, by the way, stretches from the Vietnam War to the Great Recession and on through today. Not too shabby.

Over the last decade alone, the dividend has grown at an annual clip of 14.8%. That’s twice the rate of EPS growth, which is obviously unsustainable. In addition, the last two dividend increases have been substantially smaller, likely because profit growth over that period has been disappointing.

However, a payout ratio of just 39.5% indicates the dividend is sustainable and in no immediate danger. In fact, I’d consider it extremely likely that the dividend will continue growing at a rather attractive rate moving forward.

The stock yields 2.70% right now, which compares incredibly favorably to the five-year average yield for this stock of just 2.3%.

Looking at their financial situation, the balance sheet is solid and stable. Long-term debt seems quite imposing at over $41 billion, though that’s mostly unchanged over the last five years and is very manageable for the company. The long-term debt/equity ratio is 0.51 and the interest coverage ratio is north of 11. These numbers are in line for the industry.

Profitability doesn’t immediately impress, and that’s because the retail industry is fraught with razor-thin margins. WMT does pretty well here, though the margin is still thin. Over the last five years, the company has averaged net margin of 3.49% and return on equity of 21.97%. Both metrics compare favorably to peers.

Qualitative Aspects

The company enjoys immense competitive advantages, which leads to the growth we see above.

First, WMT’s sheer size confers massive economies of scale. In addition, the firm has unrivaled pricing power and negotiating power over suppliers. They’re able to leverage this by securing low prices on merchandise, which they’re then able to pass down to consumers. This puts them in an enviable position where they’re able to beat the competition on both price and total selection, in most cases.

While this model works incredibly well in their supercenter format, they’ve been facing fierce and increasing competition from the smaller dollar stores that are able to provide convenience by fitting into spaces that Wal-Mart’s large stores do not.

As such, the company has responded by rolling out their smaller format stores, called Neighborhood Markets. And these smaller format stores are leading the way for growth – while the company registered 0.5% comparable store sales growth for FY 2015, Neighborhood Markets registered 6% growth.

Retail continues to change, though. One major change over the last decade or so has been the rising prominence of e-commerce. Now that people can buy almost anything they want/need online, this eats away at WMT’s economic moat and clout a bit. However, the company is responding to that challenge fairly well through the leverage of their own e-commerce platform.

The company reported 22% growth in their global e-commerce sales (totaling $12.2 billion), which is really incredible. WMT also notes that 75% of sales on their website – where eight million items are available – come from non-store inventory, which limits the cannibalization of in-store sales.

The company is also opening four new e-commerce fulfillment centers in the US in FY 2016, at an average size of 1.2 million sq. feet. I believe this will only add to the company’s ability to leverage multiple channels, and their massive footprint across the country gives them a unique advantage in e-commerce.

Future growth will likely come from a number of different avenues. There’s comparable store sales growth, which WMT generally delivers. There’s also the increase in the number of stores/retail square footage – the company expects to add approximately 16 million total net retail square feet in FY 2016. And then, of course, there is the growth in other channels, like e-commerce.

International growth opportunities also remain incredibly exciting – the company’s Chinese e-commerce arm, Yihaodian, saw 60% traffic growth last fiscal year. In addition, the company is experimenting with new channels, like Click & Collect, as well as other ways to add convenience/automation to the shopping experience.

The company’s stores are ubiquitous in many parts of the world, but certainly here in the US. And while retailing changes over time – it’s certainly changing incredibly quickly right now – the fact of the matter is that people need stuff like food, bathroom tissue, toothpaste, and cleaning products every single day. And WMT is highly likely to continue selling these products in high volume at the best possible overall prices for years to come. What’s really wonderful is that, due to their position in providing goods that people need, regardless of the economy, the business performed exceptionally well during the financial crisis – they grew EPS (and the dividend) straight through from 2007 to 2009.

Risks

The retail industry is incredibly competitive. There is essentially no switching costs, which limits stickiness and loyalty to any one retailer.

Margins are thin in retail, which means any excessive/unreasonable competition on price could further limit WMT’s ability to generate attractive profitability and growth.

As an international company, they face currency and geopolitical risks.

Lastly, e-commerce could cannibalize sales from physical stores, putting the company at a cost disadvantage relative to smaller peers due to their large and costly store footprint.

Valuation

The stock trades hands for a P/E ratio of 14.58. That’s significantly lower than the broader market, but more or less in line with the stock’s five-year average. Most other valuation metrics, like price-to-book, are in line with the five-year average as well.

I valued shares using a dividend discount model analysis with a 10% discount rate and a 7% long-term dividend growth rate. This growth rate appears fair to me. It’s below that of the rate EPS has grown at over the last decade, while also much lower than the dividend growth rate over that period as well. In addition, the company has a moderate payout ratio. Moreover, it’s in line with the forecast for EPS growth moving forward. However, I’m also factoring in the fact that the last two dividend increases have been incredibly modest. The DDM analysis gives me a fair value of $69.91.

Conclusion

The company is high quality across the board. Really solid fundamentals, and I love the business’s performance during the financial crisis. It’s incredible that even though they’re generating almost $500 billion in annual sales and $16 billion free cash flow (the company’s FCF has quintupled over the last decade), they’re still growing at a rather attractive rate. And with continued opening of new stores, additional sales in e-commerce, international opportunities, and comparable store sales growth, the company should continue to post EPS growth in the mid single digits.

The stock appears roughly fairly valued here. This is the first time I’ve added to my WMT position since May 2011, so this has been a long time coming. But the stock is down more than 15% YTD, and I think now’s a pretty good time to initiate or add to an existing position. The yield is far higher than its historical norm and the company is producing more FCF than ever before. I view it as a defensive, low-risk investment, which is why I felt comfortable paying full price here. The riskier I feel a stock is, the larger the margin of safety I want. But WMT isn’t going anywhere and I can’t see any reason why the company’s profit and dividend won’t be much higher in 10 years.

This was a small transaction for me, but I used a free trade in my Scottrade account for this. As such, I paid no commission fee.

This purchase adds $13.72 to my annual dividend income, based on the current $0.49 quarterly dividend.

I’m going to include current valuation opinions from other analysts below, which I use to concentrate my reasonable valuation estimate:

Morningstar rates WMT as a 4/5 star valuation, with a fair value estimate of $81.00.

S&P Capital IQ rates WMT as a 4/5 star “buy”, with a fair value calculation of $75.10.

I’ll update my Freedom Fund in early July to reflect this recent purchase.

Full Disclosure: Long WMT.

Like WMT? Think the fundamentals are solid? A good buy after the 15% YTD drop? 

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Note: Affiliate link included. 

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130 Comments

  1. Jason,
    how many trades this month? Really crazy!
    Anyway, nice buy and solid company with nice free cash of $16 billion!
    Rgds,
    Patrick

  2. Hi Jason,

    You are on a shopping spree this June.

    If fair value is less than what you paid, could you explain your reasoning

    Thanks as always!

  3. Great buy Jason! WMT has been on my watch list since I started my portfolios. I have a monster limit order in at $65 – hoping to get lucky with a 3% initial yield. Probably won’t get filled but I can always dream…

    Ken

  4. Patrick,

    FCF of $16 billion is nuts. Everything with WMT is huge! 🙂

    I’ve had nine transactions this month. A few more articles to come. Keep an eye out.

    Thanks for stopping by.

    Cheers.

  5. It looks like a good addition – their cash flow is certainly impressive. It seems like 2015 is going to be your year; looking forward to seeing the numbers at the end of it!

  6. TDE,

    Right. Keep in mind that FV is just an approximation. I’ve seen some people try to get a valuation down to pennies, and it’s just not possible. These are major companies we’re talking about here. In addition, Morningstar and S&P Capital IQ came up with higher fair values. All in all, it appears at least fairly valued here. Blending all three numbers would show that there’s a mild margin of safety.

    Cheers!

  7. Jason,
    I agree with WMT!
    Will you continue that or is it just your income by selling your book? 😀
    For sure I will keep an eye out!
    Cheers

  8. Ken,

    Certainly possible to see WMT at $65. I wouldn’t be surprised to see the whole market drop by 10% or so here any day now, which would probably drag WMT and many other stocks with it. Though, with the valuation and the YTD drop already, I’d be willing to bet that WMT holds up pretty strong in such an event. It certainly did much better in that regard in comparison to the S&P 500 from mid-2007 to mid-2009.

    But we’ll see. I wouldn’t mind seeing it drop some more. I could probably add another small tranche here. 🙂

    Thanks for stopping by. Appreciate the support. Let’s keep it rolling!

    Best regards.

  9. Nicola,

    I’m definitely trying my best to make every year a blockbuster year, but 2015 is turning out to be one of the better ones yet. 🙂

    Appreciate all the support. Keep up the great over there as well!

    Cheers.

  10. Patrick,

    I haven’t received any money yet from the book, though I should see the first royalty payment by the end of this month. It’s not life-changing or anything, so the purchases I’ve made so far this month are funded from usual ventures. The book might make it possible to add another stock purchase or two this year, but I’m really more excited about the positive change it may effect in others. Might not change my life, but I hope it can change others’ lives. 🙂

    Cheers!

  11. Hi there Jason,

    Got myself some shares of WMT at 72.69 as well, surely one of the best picks out there thanks to the correction that it had since the beginning of the year. The company is solid and I agree completely that fundamentals are very good, in respect to its peers (Target for example) P/E is even lower than the rest of the pack. Only thought goes to how well they will be able to grow earnings, but that’s a different story as they are a giant and maybe earning growth might actually slow down a little…

    Still I am long WMT all the way!

    Ciao ciao

    Stalflare

  12. Man you sure are on a buying spree this month! I’ve had WMT on my watchlist since it hit $75 but have been reluctant to pull the trigger. I’m glad to see someone picking it up to help confirm my suspicion that it is in fact on sale now.

    I may be joining you in the WMT shareholder club sometime in the next few weeks, especially if prices creep into the 60’s.

    Regards,
    Dalton Kuhn

  13. Jason,

    Glad you have the money to fund all these trades inside the space of a month. Insane.

    Talk about snowballing. I’m definitely curious to see what this month does to your overall net worth number.

    Great work.

    FM

  14. Stalflare,

    Glad to be a fellow shareholder with you. 🙂

    I’ve been a longtime shareholder now, but I felt good about upping my stake for the first time in many years now. The YTD drop was certainly warranted (WMT is definitely not worth $90/share), and it now trades for a solid price relative to the value. It’s a low-risk play that’s not going anywhere. And I had capital and room in the portfolio for it.

    WMT will likely not grow as fast in the future as it did a decade or two ago, but I think it can still generate really solid dividend growth and total returns. We’ll see.

    Take care!

  15. Dalton,

    I’ve not really watched WMT too much over the last couple years, instead content to just hold what I had and collect the growing dividends along the way. But the big YTD drop put it back into consideration, and I think it’s a fairly solid risk-adjusted buy now. Not going to grow like gangbusters, but also not likely to go bankrupt anytime soon. In the meanwhile, I suspect they’ll continue to grow that dividend well above the rate of inflation for the foreseeable future. It’s not like billions of people are all of the sudden going to start shopping somewhere else en masse. 🙂

    Hope it drops into the 60s, though. I think I could add a few more shares if it drops another 10%.

    We’ll see how it goes. Thanks for stopping by!

    Best wishes.

  16. FI Monkey,

    This is definitely a rare month. I’ve averaged closer to two or three transactions per month over the last few years. But I’ll gladly accelerate when I have the juice and some wide open road in front of me. 🙂

    I don’t really track net worth at all, but I am excited to see how the dividend income sits by the end of the year. $7,200 is the goal, and it’s going to be tough. Doing all I can to make it happen.

    Thanks for the support!

    Best regards.

  17. Jason,

    That which is in motion stays in motion, right? Can’t stop me now. 🙂

    Appreciate the support. And thanks again for the interview. Hope it provided a lot of value for the readers.

    Cheers!

  18. Dividend Mantra,

    Nice buy on WMT. This is a very safe investment. The definitely are not going out of business any time soon.

    Now you can enjoy those dividends for years to come

  19. Jason,
    WalMart always lowest price, but never free! As always you provide excellent information about a great retail store. It is to bad that Mr. Sam is not still around. I do believe things would be different, in many ways. I purchased WalMart years ago, and have been very happy. This was back in the days of stock splits! 🙂 I love getting more stock! Please keep the information coming.

  20. Jason,
    Another buy? Nothing is stopping you this month! Another excellent buy.
    I averaged down earlier in the month at 74 – and will add more if it continues to stay at these levels or lower. The only thing with WMT is the growth, but I am sure they will find opportunities in other areas to grow.
    D4S

  21. I nibbled this month on WMT also. Running out of capital. Need to save more! Almost at $800 CAD a year in dividends in the little portfolio, and dividends beget dividends over time!

  22. Nice buy Jason. WMT is a company that people are going to go too time after time. So this company has a great moat around it. WMT will be able to pay you that nice dividend for a long time. Also I am reading your book and about half way. its been a great book to read so far, and I can’t wait til I get to the end. keep up the the great work Jason. Cheers Michael

  23. I’m a little bit scare to add more. I purchased at 83,9 and i’m gonna wait to buy at rank 65-70$. I think we can see WMT at a better price.
    Still waiting for JNJ at 90$, KO at 35& and XOM down 80$.

    Cheers from Spain

  24. IP,

    Thanks for the support. Much appreciated!

    I suppose anything is possible, but I don’t see WMT going out of business. More likely to see them just grow slower in the future due to their massive size. But it’s a great low-risk stock to complement some of those other plays that are designed to generate more income/growth in exchange for potentially more risk.

    Best wishes.

  25. Mantra,

    Awesome! Like you have said it – you are on a rampage for a lack of better way to put it – just awesome. Honestly, it pumps us up how aggressive you are approaching it, and great that you took advantage of a good price with a free trade. Congrats! FCF is huge, Yield is solid (greater than the 5 year) and the growth rate – hope they keep it high with the lower-ish payout ratio. Money.

    -Lanny

  26. Nut501,

    Yeah, it’d be very interesting to see what Sam would do with WMT right now. A legendary manager and a visionary, that’s for sure. It seems that McMillon ha a good grasp on things, but we’ll have to judge his results after he’s been at it for a few more years.

    Sounds like you’ve been a very longtime WMT shareholder. I’m sure you’ve done very, very well there. It’s surely a lot of fun to get into a high-quality company while they’re still really taking off and ride that rocket for the long term. You’re probably very excited for those WMT dividends to roll around. Life is good! 🙂

    Cheers.

  27. D4S,

    I’m with you. I wouldn’t mind averaging down if it drops another 10%. Not a huge fan of retail, but WMT is fairly dominant.

    We’ll see about the growth. The 10-year track record is solid, but the last few years have been disappointing. Some of the initiatives are exciting, but it’ll take time for those to pan out and see how they affect the bottom line. A low-risk stock, but definitely not a growth play.

    Cheers!

  28. Looks like another solid buy. For a relatively defensive company that carries as much scale and weight as they do, fair value is a pretty solid place to add shares. You’ve had a busy, busy month and with over a week left I expect there’s probably more to come. Keep up the good work DM!

  29. Michael,

    Thanks for the readership – here and the book. Much appreciated! 🙂

    Indeed. WMT isn’t exciting, but it never has been. Meanwhile, they’ve made a lot of people a lot of money. I think that’ll continue for the foreseeable future. The dividend is sustainable and I see no reason it won’t grow at an attractive rate over the long haul. The last couple raises have been disappointing, but the long-term track record is pretty impressive.

    Thanks again. Let me know what you think of the book when you finish it. Hope you enjoy it all the way through. Did my best to create something affordable, inspirational, actionable, and evergreen.

    Best regards!

  30. Javier,

    I wouldn’t be at all surprised to see WMT drop down to $65 or so, though I think it would probably take a broader market pullback for that to happen. WMT was awfully expensive at the beginning of the year, but it’s largely corrected back into fair value territory now. Of course, I’d like to see it down to $65. That would be a nice opportunity to add a few more shares.

    Let’s keep our fingers crossed! 🙂

    Take care.

  31. Lanny,

    I’m doing my best, bud. I see the top of that mountain and I’m climbing as fast and as hard as I can. Let’s see what the view looks like. 🙂

    WMT is solid. Not going to knock anyone’s socks off with the growth or the yield, but the risk seems low, the valuation appears fair, and the business is about as solid and dominant as it gets. Fundamentals are there and the moat is quite wide. We’ll see how it goes!

    Thanks for stopping by.

    Best regards.

  32. JC,

    Indeed. Very defensive investment here. Doing my best to keep things balanced as I continue to build the portfolio out. Just another brick in Chateau Freedom! 🙂

    Appreciate the support. Hope all is well with the family.

    Best wishes.

  33. Jason,

    Great buy on a great stock! WMT has been on my watch list for quite a while in my ROTH, but I have a good amount of Target sitting in there. It’s hard to pull the trigger on such a complimentary stock. I will be eyeing WMT for my taxable account though…

    Happy Investing!

    -Mr. Retire by 35

  34. Mr. RB35,

    Thanks so much!

    I don’t really think of stock ownership as being any different in regards to what account you own a stock in. Whether you own WMT in your Roth or your taxable account really matters not in relation to how complementary it is to TGT and/or the fact that you’re still a shareholder. Stock is stock. However, it’s certainly plausible to think about different accounts in terms of a stock’s yield and dividend taxation. But WMT and TGT are fairly similar there.

    That said, I own both. They both have a lot to like but differentiate themselves in a variety of ways.

    Take care!

  35. Jason,

    Love the last two purchases. Solid value plays with the recent pullbacks. I averaged down on my Walmart shares just last week. I feel like it is a great defensive investment, and it never hurts to see the same stock in both Buffet, and Gates’ portfolios. Are any of the big banks (aside from WFC) on your radar? I had intended on buying JPM but it has just been soaring lately.

    Guy

  36. Wow…those purchases are coming hard and fast! You are doing great, Jason.

    Keep up the great work and best wishes
    R2R

  37. Nice purchase! I’ve also put some cash into WMT since the stock has taken a small beating lately. I don’t think many people know this, but Walmart also owns a Realty website to market, sell, and lease space within and near Walmart stores, and when you own 11,000 stores, you own a huge amount of land that you can lease to tenants. Ever notice that when a Walmart is built, they build a strip center next to it with a Dollar Tree, Gamestop, etc. It’s not just coincidence…Walmart builds the strip and makes a ton of cash on leasing it. Inside of Walmart stores near the front one often finds banks, salons, eye doctors, franchised fast food restaurants, etc…again its all leased space to tenants and just another way to make $.

  38. Guy,

    Absolutely. With you 100%. Berkshire is still a major shareholder even though they haven’t bought much in a while now. Great to have a guy like Buffett on your side for sure.

    WFC is really the only major US bank I like. USB is a solid regional play. There are also a number of local banks that have really solid fundamentals, though they’re inherently riskier. I actually think some of the Canadian banks offer a lot to like and a lot of value here. TD and BNS, specifically. I may end up looking in that direction in July. Great yields, solid values, and an oligopoly. Pretty good stuff.

    Thanks for stopping in!

    Best wishes.

  39. R2R,

    Appreciate the support very much. Doing all I can to keep climbing that mountain. 🙂

    We’re doing great things as a community.

    Cheers.

  40. Adam,

    Hmm, I wasn’t aware of all that. I knew that they had a lot going on with the sale/lease of former buildings and then the leasing of space in and immediately around the buildings, but I didn’t know how far out that extended with strip malls and what not. Not sure how much they have to do with leasing/selling space to stores like Dollar Tree, but those dollar stores have been extremely competitive over the last few years. The website is interesting, though. Neat to poke around a bit and see what’s going on there.

    Thanks for sharing that!

    Cheers.

  41. ADD,

    You’d be hard pressed to find someone more enthusiastic about all of this than me. I live and breathe it. 🙂

    Appreciate the support. Let’s keep it going!

    Cheers.

  42. This has been a Hell of a ride for you (and for us to watch)! I enjoy all of these articles and appreciate the amazing amount of information you pack in so succinctly and eloquently. They are all joy reads and major brain candy. I really like this pick at this price. WMT reminds me a lot of MCD; BIG, still can grow here and there, and a divy that keeps shareholders loyal. Everyone seems to hate ‘em but these are the same bashers that still, not so secretly, shop at WMT and still grab a burger at MCD. Why? Cuz, they are on in every neighborhood–everywhere. Even the whole minimum wage debacle is in line and coupled. I like your pick. Congrats. It’s a good one. I wish I had more money so I could jump in. Woe—eees—me.

  43. good company, but very disappointing dividend growth over the past years, not a good fit for a dividend growth portfolio.

  44. WMT has been a stock I’ve had on an “I’ll get around to it” list for some time now. Perhaps that time is coming up soon. I am not really a fan of retail either, but I bought TGT right after their security breach and have enjoyed quite a nice appreciation. So perhaps I’ll wait until WMT goes down some, as they seem to have a good grasp on making a business last. Thanks for the analysis and good job!

    – HMB

  45. divy,

    Thank you very much. Glad you’re enjoying the content and what’s going on. Doing my best to make it just as enjoyable for you readers by going really in-depth with these articles. 🙂

    It’s funny you mention MCD. I was at my local Mickey D’s today to grab lunch and do some writing. It was packed. I actually took a picture and tweeted it out just a few minutes ago. That’s why I ignore the noise, collect the dividends, and keep rolling the snowball. Can’t pay my bills with noise, right?

    Thanks for the support!

    Best wishes.

  46. Adam,

    The last couple dividend raises have been disappointing, but in line with EPS growth. Shows prudence, in my view. Even the best companies in the world sometimes hand out small raises or even miss a raise here and there. I tend to keep perspective and track the long term.

    Take care!

  47. HMB,

    Yeah, TGT has responded really well after the breach and all that. Glad I averaged down heavily on it. Not that I really care much about the capital appreciation, but the dividend raises have been quite strong since all that happened.

    Both firms will likely be around for a very long time. I’m not a huge fan of retail, but there are a few that stand out. WMT, TGT, and COST all come to mind pretty quickly. KR has also performed really well over the last decade. WFM is one I watch a bit as well.

    Just gotta stick to the quality and buy at a solid valuation. Rinse. Repeat. 🙂

    Thanks for stopping by!

    Cheers.

  48. Great buy Jason! We recently picked up more shares of WMT for our family’s dividend stocks portfolio. Since prices still remain depressed, WMT is one of three stocks we’ve listed in our recent Ask the Readers post. In the long run, we think betting on the #1 retailer is a good risk to take. 🙂

    Wising you continued success on your personal journey. AFFJ

  49. Yet another great purchase, Jason. Big congrats! I’ve been adding to my small position in WMT as well. Always reassuring to be on the same page as you my friend. Loved the write up, hope all is well and keep up the awesome work!

  50. AFFJ,

    Nice. Looks like we’re on the same page here. A high-quality company like WMT down by 15% on the year definitely gets my attention, especially when it drops back down into value territory. I have no idea where the stock price goes from here, but I’m fairly confident the company will be bigger, more profitable, and paying out a much larger dividend to shareholders a decade from now. And I plan to be along for the ride. 🙂

    Glad to be a fellow shareholder with you here!

    Cheers.

  51. Ryan,

    Just trying to keep up with you. 🙂

    Appreciate the support and glad to be a fellow business partner in this fine retailer. Looking forward to holding this stock for decades to come, as I’m sure you are as well. Let’s see how it goes!

    Hope all is well in CA.

    Best wishes.

  52. Hello Jason,
    Don’t know where else to post this question. But anyway, would be possible for you today an article on dividend investing in Europe? I am living in Europe and got several US stocks as well as European stocks. My base currency are Euro’s.
    However, with the EUR/USD volatility my income from US dividends isn’t something I can build on. I hedged my US stocks, but I cant hedge the dividends.

    Can you share your view on how European investors should approach dividend investing?

  53. Astuna,

    Unfortunately, it would be nearly impossible for me to address that subject with any breadth or accuracy. I’m not from Europe, so I’m somewhat unfamiliar with all the tax aspects and other rules. And European countries can vary substantially from one another.

    I just don’t really discuss a topic unless I’m confident enough and familiar enough with it, and that’s something that I’m far from confident about. That said, there are a number of European bloggers that discuss dividend investing. But they vary from country to country. I’ve seen the UK, Finland, and Belgium represented well. A Google search will probably put you in the right direction there. 🙂

    Sorry I couldn’t be of more assistance.

    Take care!

  54. Thanks for sharing another buy with us. While I’m not a fan of WMT nor other retailers like TGT I can see why it has become popular as of late. Keep pushing that snowball down that hill and watch it grow. June has been a record month for my portfolio as well in terms of new buys. I just posted my latest buy which brought me to 8 different buys for the month… including baby DivHut of course. Keep inspiring.

  55. Jason,
    how do you judge the impact on profits for Wal-Mart by competitor Trader’s Joe?
    What do you think about Trader’s Joe future in the US-market?
    Will it be a big competitor for the other trading companies?
    Or do you think the US-market is big enough for Wal-Mart?

    Thanks in advance for your answer
    ZaVodou

  56. Hello Jason:

    I am an European investor from Spain and I want to congratulate about your last stocks. As you said, I am not in love with retail sector (I have TESCO in my portfolio and this is the only share I want to sell). But that is another history. WalMart is “too big to fail” and american market is bigger than English. But WM has a low yield is not it?.

    About your mail you answer to me, thanks you very much. At the end I buy some Spectra Energy shares ;). But I like your point of view.

    Good june for your portfolio and you are close to your goals!. Congratulations.

  57. Another stock buy!! The value of your freedom fund will be soaring. If Morningstar gives it 4 out of 5 it is worth investing in, imo. Good luck.

  58. Hi Jason!

    Really solid buy now after the price has come down a bit. I have become a bit addicted to your blog. Each time I get a new fix, I feel that I have to wait forever for a new article. I guess I have to check some older stuff in the mean time. Keep them articles coming or I’ll have to check myself into a rehab! 🙂

  59. I recently bumped my monthly investment amount up in LOYAL3 for WMT shares due to the drop in share price. I think it is a good value at this point.

  60. Ah, Yes. Walmert stores, one of those shares that could fit to your recommendation of first investments I suppose 🙂 Im looking forward to invest some funds in the future in US markets and this would be one of my targets. Retail is something that humanity does since stone-age, so it will be here as well in 40-50 years for sure. Inflation will also do its job in booming market times so their sales and profit should also climb during that period and such stocks I suppose intends to over-perform inflation in long term. I’m surprised why you don’t like retail. Its a basic business. Its something similar to banks that was and will be 100 years ago and later. I would say that investing in consumer goods is a bit more dangerous as you never know if that thing that company produce (like coca-cola or pepsi for ex) will be used in future, like fax machines of floppy discs. Anyhow its a great purchase here 🙂

  61. Hi Jason,

    I’ve come such a long way in my knowledge from reading your blog and book’s i’d like to say thank you so much and keep up the great work!!

    I’m just looking into ETFS as I want dividend growth companies in asia to add to the portfolio!……..thought your the best person to ask….

    Would you ever consider expanding your reach into Index funds that say gather you exposure to Asia or south america? I appreciate they have fees but surely the exposure and diversification they offer to other global markets would be worth it. For example an ETF providing exposure to the Asian dividend market would surely be worth it?

    One quick question over ETF Fees – I understand you said ETF’s effectively “chop the branch of the tree as they grow”…..surely this means that ETF’s will always decay? and especially in bearish markets!!?

    Are there alternative funds that exist that provide the diversification and the growth but not cut the branches off to cover there fees??

    Thank you!

  62. Jason,

    WMT is probably one of only a few retail plays I’d ever want to make. Their drop in valuation makes it all in all a smart play. Though their growth might leave a little to be desired in terms of dividend increases, long run they should be fine. I already own TGT, and along with them COST, WMT, and a few others there are not a lot of good options in the field. Only thing that concerns me with WMT is that they have to make a 180º turnaround in some of their stores to keep up with the other retailers in terms of quality and display.

    Still that is likely just a bump on the road to FI.

    – Gremlin

  63. A good buy at these levels. Unfortunately, I purchased about 15% higher than today’s price, so buying today is quite a bargain. When sentiment changes this stock should recover – in the meantime I’m getting paid to wait 🙂 Having called on this company for the better part of my career, I can attest that there is a lot of stability and I don’t lose any sleep owning the stock.

  64. Wow you are on fire with purchases this month! Great buy with WMT…i was actually going to pick some up this month as well, but found CVX to be too good to pass by. I may pick WMT up next month. Hopefully Mr. Market drops a bit so i can pick it up at an even better level than it sits at today. There is no denying Walmart is here to stay…go to any small rural town and there may be nothing around but you can almost always find a gas station and a Walmart! No one has the purchasing power that Walmart has either. Great company, and great pickup!

  65. Hi Jason,

    I think Walmart is an interesting buy, and I agree with you. I’ve been running my own valuation model borrowed from Bruce Greenwald’s teachings re: Earnings Power Value. The great thing about the EPV model is, it assumes no growth and produces a range of possible valuations based on a range of WACC’s. I get an EPV per share of between $71 (using 11.4% WACC) and $121 (using 7.1% WACC). I personally think these WACC’s are too high, but I’d rather be conservative. The result is pointing towards the same empirical result, which is that Walmart appears undervalued. I also note that adjusted after tax Free Cash Flow is chewed up by CAPX (which exceeds depreciation by almost 1/3). I wonder how much of the CAPX is maintenance vs. new build CAPX, and given that Walmart is Walmart, I wonder whether the value proposition eventually becomes, reduce &/or close under-performing stores in order to reduce excess CAPX. Nice buy.

  66. I went and bought your book. I’ve only read the couple first chapters but very good so far!

  67. DH,

    Looks like June is busy all around. Gotta love being able to put a little more capital than normal to work and juice that dividend income even more.

    Keep up the great and busy work over there. 🙂

    Best regards.

  68. ZaVodou,

    I don’t think retail is a zero-sum game simply because there are more and more people that are going to buy more and more stuff over time. And not all retailers are direct competitors of one another – I’m not quite sure a shopper at Trader Joe’s is necessarily a Walmart shopper. Different customers. Whole Foods, however, would be a more apt comparison for Trader Joe’s.

    I don’t follow Trader Joe’s, so I can’t really comment as to their future. I can say that there is one here in town and it’s always extremely busy. But being a private company, we can only speculate as to how well they’re actually doing.

    Cheers!

  69. ClassicCo,

    I hear you there. Retail is fraught with companies that were once major retail titans and are now shells of their former selves. And the industry is changing faster than ever. WMT seems to be doing the right things, but only time will tell. In the meanwhile, people have to buy certain goods on a daily/weekly/monthly basis. As long as WMT provides the convenience, service, and prices people expect, they’ll do well. If they fail to provide that, they’ll likely slowly die off over time. But they certainly have the position and tools to compete better than just about anyone.

    Best of luck with Spectra over there. Hope they knock it out of the park for you. 🙂

    Take care.

  70. Laura,

    I’m so happy and so fortunate to be in a position where I’m still able to regularly buy stock. Life is really good.

    And I agree with you there on Morningstar. My analysis generally jives pretty well with what they come up with, both in terms of fair value and their overall thesis. We’re sometimes far apart, but it’s not often. If they give four or five stars, it’s probably worth looking into.

    Hope you’re having an outstanding month over there as well!

    Cheers.

  71. Sampo,

    Thanks for picking up the book. Much appreciated. Hope you enjoy it all the way through. You’ll have to let me know what you think. 🙂

    And I’m glad you’re enjoying the blog. I try to put out a lot of high-quality content here. At one point, I wanted to publish a new article everyday. But I realized that would just be too difficult and would probably sacrifice the quality. In addition, I write more than 15 articles per month on the freelance side. So I’m trying to avoid burning myself out. But I do all I can to mix it up, provide inspiration, and keep the quality high.

    Thanks again!

    Best wishes.

  72. John,

    Sounds like a good move there. It’s not extremely cheap, even after the drop, but I think it’s a good time to initiate or add to a position here. First time I’m doing so in years, so there you go. 🙂

    Glad to be a fellow shareholder!

    Cheers.

  73. furidolt,

    Well, retail isn’t going anywhere. That’s for sure. What does happen from time to time, however, is that major retailers – even successful ones – fail from time to time. It’s a very competitive industry with very slim margins and essentially no switching costs. So it’s a lot of competition on price, especially on the low end. I don’t think WMT is going anywhere, but they’ll only survive another 50 years if they continue to provide the convenience, selection, price, and service that people are looking for. And that equation is changing fairly rapidly right now, with a focus on instant service and e-commerce. I think WMT has the tools and capability to compete with the best of them, but it’s up to the company to adapt and thrive.

    Thanks for dropping by!

    Best wishes.

  74. Laurence,

    Thanks for the kind words. I’m glad you’ve learned a lot and enjoyed the process thus far. I think these subjects – financial independence, living below your means, achieving lasting happiness, and investing – are really just a lot of fun and super interesting. So I’m glad you share that enthusiasm.

    As far as exposure to foreign markets, I already have that. Many of the companies I invest in generate a substantial (or even majority, in some cases) portion of their sales/profit overseas. When you pull up financial statements on the likes of Apple, Coca-Cola, Philip Morris International, and Johnson & Johnson, you’ll find that they already have significant business in Asia and other key international markets (PM does all of its business outside the US). So I get the safety of owning a US-domiciled company while also getting the exposure to those foreign markets. Many US-based blue-chip companies generate at least half their revenue from outside the US. So buying a foreign stock/fund directly isn’t really necessary for that exposure. Really the best of both worlds since you’re not looking at extra geopolitical risk directly as an investor but you still get the diversification.

    In regards to cutting off the branches, that’s meant in terms of selling off shares/equity/stock. So what you’re hoping happens is that the fund/stock you’re selling increases in price at least as fast or faster than you’re selling it off. Sometimes that happens, sometimes it doesn’t. My strategy instead doesn’t need to hope for that. I collect the income only while the asset stays intact and actually grows. It thus provides a huge margin of safety in case you one day have to access a large sum of money all at once, be it for a medical emergency or something else. And you don’t have to worry about market pricing or anything else. So it’s just a totally different way of looking at investing, becoming financially independent, and generating truly passive income.

    There are a lot of funds out there to choose from. I’ll say that if I weren’t investing the way I do, I’d probably just buy the entire market (both US and ex-US) and plan to withdraw 4% of the assets in (early) retirement and hope for the best. If you’re looking for a fund that mimics this strategy, the best I’ve come across is SCHD.

    Hope that helps!

    Best wishes.

  75. Gremlin,

    COST is a great retailer. I regret not buying them years ago. I still wonder about their footprint and growth potential with that format and all, but they’re doing really well with it.

    I agree with you in terms of store improvement at WMT. I’ve never actually been to one of these dirty/poorly stocked stores that people so often talk about, but I know they’re out there. The only interaction I’ve ever had with WMT has been the way of clean and fully stocked supercenters and then newer, smaller Neighborhood Markets. All positive for me. But I suspect their older stores in less affluent neighborhoods need some attention.

    Thanks for stopping by!

    Cheers.

  76. I don’t shop at Walmart, but I get the feeling that they’re not going anywhere any time soon. Sounds like you’ve got another good buy, with a nice moat.

  77. JayP,

    I’m with you. I don’t lose an ounce of sleep at night owning WMT. 🙂

    Glad to be a fellow owner with you here!

    Best regards.

  78. Josh,

    I’ve been really fortunate this month to have a pretty good cash flow situation going on, even with quarterly estimated taxes due. Not every month is so wonderful, but I’ll take it when I can get it. 🙂

    I hear you there on WMT. I’ve lived in both mid-sized cities and very rural areas. And the company seems to thrive across both settings. As long as they continue to deliver what people are expecting, they’ll thrive. We’ll see how it goes!

    Thanks for dropping by. Sounds like you’re having a great June over there as well with the CVX buy. I’m also keeping my fingers crossed for that elusive pullback.

    Take care!

  79. Dan,

    There are a lot of ways to value a business. I personally prefer taking all future cash flow (via dividends) and discounting it back to today. Ultimately, any business, to me, is worth the sum of all cash flow it can possibly ever produce, discounted back. But the WACC for WMT appears to be much closer to the latter number you’re looking at up there.

    As far as stores and capital expenditures, I think the proposition really becomes whether or not e-commerce cannibalizes sales in physical stores, which can put them at a cost disadvantage relative to competitors without that massive footprint (like Amazon). But with returns staying stable over the last decade, I’m not real concerned about that. And if they have to right-size the business, then that’s what they’ll do. I think they have the tools to profitably compete through the physical stores and via e-commerce, however, with both channels working together. We’ll see.

    Cheers!

  80. DB40,

    I’m with you. I can’t imagine WMT will go the way of the dodo with their competitive advantages. It would take a massive and unprecedented shift in the industry or some type of corruption at the corporate level, but I think they’ll be around for quite a while. I’m sleeping well at night. 🙂

    Thanks for stopping in!

    Cheers.

  81. Wow Jason, you’re on a tear this month! Good for you brother! Can’t wait to get investing again myself.

  82. Hi Jason,

    I’d like to hear your thoughts on Home Depot. I’ve owned shares for 11 years now and it has been great on the dividend growth and price appreciation fronts. I know retail isn’t typically your cup of tea, and HD is more cyclical than a WMT, but it has been a fine performer and homes/home improvement isn’t going anywhere. Thanks from Troy, MI!
    Fred

  83. WBAN,

    Thanks so much. Really appreciate the support.

    I’m sure you’ll be back on the horse before you know it. Sometimes cash flow dries up due to personal circumstances, but success begets success. One great event will surely lead to others. Just keep at it. 🙂

    Best regards.

  84. Fred,

    Thanks for dropping by! Glad to have a reader from my home state. 🙂

    Home Depot is a fine company. The stock has outperformed WMT by a large margin over the last decade, though a good chunk of that outperformance is due to valuation. HD has had an even tougher time growing over the last 10 years, which isn’t surprising considering their size. For perspective, it appears that HD has grown EPS at a compound annual rate of 6.29% over the last decade – lower than WMT. Yet the valuation is much higher here.

    I think both HD and WMT will have to be creative in regards to generating attractive growth (due to their huge size), but I like WMT’s much lower valuation and much more attractive yield here. If I owned HD, I’d be perfectly content to hold it, however.

    Take care!

  85. Congrats on the purchase Jason! I know some readers have mentioned they’ve been dissapointed by the small dividend increases over the last couple of years, but personally I’m not too worried about it. WMT is spending money to better train employees, pay their employees more, improve their stores and invest in Walmart.com, so once these initiatives are finished, I’m sure the dividend will grow faster.

    I very excited about the Neighborhood Markets and Walmart Express stores. I think WMT utilizing its cost advantage from its economies of scale, will allow these stores to offer better prices in many urban areas than smaller stores like Walgreens, 7-11, or local grocery stores and this will continue to drive sales, profits, and of course dividends!

  86. Totally agree Jason. Interestingly, the Amazon e-commerce cannibalization “thesis” seems to have already gained notoriety throughout 2015 to the detriment of investment appetite for Walmart. I’m a buyer of Walmart on the hypothesis that Amazon will continue to eat Walmart’s lunch ad infinitum.

  87. Peter,

    I’m with you. The last couple dividend increases haven’t been great, but the long-term average is still pretty impressive. Businesses ebb and flow. Investors who think that everything is linear and every year is going to be outstanding will likely be disappointed and frustrated if they’re in it for the long haul. If you’re really investing for the next 30 or 40 years, then there are going to be years for many businesses where things just aren’t that great. It’s up to you how you read that and what you do, though.

    All in all, people have to buy the goods WMT sells. And people generally want a good deal, good selection, good service, and convenience. WMT excels at most of this most of the time. They’re improving convenience and I think service should improve as the pay initiatives come online. They’ve already got selection and price down pat. Hopefully, worker morale improves to the point to where that just adds to the moat via better service. We’ll see how it goes.

    I’m also excited about the smaller format stores. The dollar stores have come on strong, especially during the Great Recession. WMT is responding there, which I like. Takes time, however, for a major company like this to pivot and get things really moving. So one has to be patient.

    Thanks for adding that!

    Best wishes.

  88. Hey Jason,
    Good buy on WMT. There are lots of great companies that have dropped significantly in price even tho’ the DOW is still at nearly all time highs. WMT has gone from 90 to 72. Perplexing but I will certainly take the discount when offered. Also the REITs have dropped in the range of 10% “in anticipation” of interest rate hikes. With regard to that I do not think Realty Income Corp. is going to perish to ashes when the Fed raises rates 1/4 pt. Anyway, your journey is going great. Dan

  89. Jason,

    I’ve noticed you’re staying away from oil stocks recently even thought a lot of them have taken a big hit in the last year. It looks like the big players (XOM, CVX, NOV) may be decent value plays to me yet you and others I follow have steered clear. Any specific reason. I like the pick up of WMT, however the oil stocks seem to have a larger disparity between market and fair value. This is not me trying to criticise the pick by any means, just trying to get a little understanding as I’m relatively new to this. Is their a macro economic reasoning behind this?

  90. Dan,

    I’m not surprised that WMT is down so heavy on the year, but it’s perhaps perplexing that WMT was ever $90 in the first place. Those that think the market is efficient can’t really explain why a company is worth billions of dollars more or less from one day to another. I think the YTD performance of WMT’s stock even though the business hasn’t really changed all that much is a good example as to why I believe Mr. Market is as bipolar as ever.

    Some of the high-quality REITs remain pretty attractive here. I’ll likely add some more exposure there in July. The values, yield, and quality are compelling with a few names. Let’s hope Mr. Market likes REITs even less next month than he does right now. 🙂

    Cheers.

  91. Travis,

    I can’t speak for anyone else, but I’ve long been too heavy in energy. I’ve discussed that quite a bit here on the blog in general, and specifically here:

    https://www.dividendmantra.com/2015/05/sector-allocation-as-it-pertains-to-dividend-growth-investing/

    I was able to buy a lot of the supermajors at similar prices to what they’re trading at now, but when oil was priced much higher. So I’m not sure those low prices have fully worked their way through the system. The integrated players hold up pretty well during times of turmoil due to the downstream operations, but I think there’s more pain ahead for some of these companies. And some are cheaper than others. NOV trading at book seems like an incredible opportunity, but, again, I’m already maxed out there. Some of the midstream stuff seems like a great value as well after strong (perhaps too strong) corrections; I recently added to my OKE position. I have some room for XOM and may add a little here and there, but I’m not as enthusiastic about buying XOM at $85 with oil at $60 as I was when I initiated my position at $86 with oil at ~$100.

    Hope that clears it up for you. 🙂

    Take care!

  92. Hey Jason,

    Nice buy here dude. You’re killing it this month, and I’m really happy for you dude. You’re an inspiration man. I’m becoming more and more fearful of the retail sector with so many big chains closing stores all over. Looks like Wal-Mart is the exception here which is great. The moat is fantastic. Keep it up.

    Best regards
    DB

  93. DB,

    Thanks so much. I really do my best to inspire and motivate by kind of blazing that trail. 🙂

    I hear you there on retail. Not my favorite industry, either. But I think there are a few out there that buck the trend, with WMT being one of the few. In the end, people have to buy stuff and retailers will sell that stuff for the foreseeable future.

    Appreciate the support. Let’s keep buying and climbing!

    Cheers.

  94. Hi Jason,

    It’s great to see you in Omaha but it’s a pity that we did not have time to talk too much.

    Thanks for sharing your recent buy. I thought VIAB current price is undervalued. It;s current yield is 2.4%, payout ration is 30%, dividend growth rate is also good.

    What do you think? I am long this stock.

    Thanks

    Joseph

  95. Joseph,

    It was great meeting up with readers like yourself in Omaha. I wish we would have had more time. I honestly could have sat down and just talked for eight hours straight. 🙂

    Viacom is a solid company. Really great fundamentals across the board and robust growth since being spun off. In addition, Berkshire has been a net buyer of media companies like (and including) VIAB. However, I do remain a bit concerned over the long-term trends regarding content consumption and how the channels are changing all the time. Viacom owns some excellent content production properties, but that’s just something to be mindful of. DIS is personally my favorite media and entertainment company, though. But VIAB is a lot cheaper and sports a much higher yield (and probably rightfully so).

    Thanks for all the support. Hope we get an opportunity to meet up at some other point!

    Best wishes.

  96. blahblah903,

    No problem at all. I haven’t taken a survey in a few months now, so I’m sure these are all from referrals. I tend to stock them up, especially now that I’m building out the other brokerage account. I entered the month of June with four free trades and I used them all up.

    Take care!

  97. Wow! What a month! Congratulations. WMT is a great company suffering from short term weakness. No doubt it can overcome it like it has done so many times before.
    Great month especially with DIS and their positive announcement.

  98. Jason, it´s wonderful that you keep on investing so the snowball is getting heavier!

    Well, with WMT I do see some clouds on the horizon:

    (1) latest dividend growth rate was just 2,4% … plus 2,7% yield (=5,1%) is very, very far away from the hurdle return rate of 12% (according to Josh Peters/”Ultimate Dividend Playbook”)
    (2) far more serious: I do imagine strong competition from probably LIDL and ALDI (see what they done to TESCO in GB – devastating!).

    WMT, I wouldn´t touch them!

    Best wishes
    Thorsten

  99. Khen,

    Appreciate the support. 🙂

    We’ll see how it goes. I think growth will be challenging only because of their massive size, but it’s really just a defensive investment here. Just balancing out those high-risk plays with stocks like WMT. All in all, the portfolio is coming along.

    The DIS news was unexpected, but wonderful. Just a wonderful company doing wonderful things.

    Best regards.

  100. Thorsten,

    I’m trying to turn this snowball into an avalanche. Look out below. 🙂

    The last couple dividend raises have been disappointing, but, as I was mentioning elsewhere, even great companies go through periods where everything isn’t rosy. But that’s oftentimes the best time to buy. When things are rosy, stocks are expensive. Ignoring DIS, for instance, four or five years ago because dividend growth had been disappointing (actually non-existent) over the prior couple years would have been a mistake. I try to look at things with a 30-year horizon and go from there. If a company continues to disappoint for years and years on end, that’s something to look at. But looking at performance under a microscope is probably a big mistake. Pull those numbers out over a longer period of time and everything changes. WMT’s dividend increase was almost 18% a few years ago, before the last couple disappointing raises. That’s a solid average. So adopting a “what have you done for me lately” attitude and not keeping a long-term perspective might lead you astray.

    Thanks for stopping by!

    Cheers.

  101. Jason!

    Regarding the longterm approach I am explaining my second point above.

    Several years ago WMT tried to establish business in Germany and after a fairly short time it completely withdrew again. The likes of super saving food stores of ALDI and LIDL left no room for WMT over here. ALDI and LIDL drive a very aggressive expansion plan. After having Europe and GB (again check out TESCOs fall from grace directly linked to both) very successfully “invaded” both announced to conquer the US market and take WMT head on and I am in no doubt whatsoever that WMT will survive but margins will fall substantially IMHO; therefore a definite no-no-buy for me.

    Anyway I am curious about your next “Recent Buy”! … new position again or average down?

    Best wishes
    Thorsten

  102. Thorsten,

    That’s interesting. ALDI has been around here in the US for a long time now. No conquering, though. 🙂

    I added to an existing position with my last purchase. The post will go live later today.

    Cheers!

  103. Rich,

    Buy on the dips, right? 🙂

    WMT is certainly no growth stock, but I think the value is there. When you buy cheap, a company doesn’t really need to do anything outstanding to produce solid long-term total returns. And I think the company certainly has the tools to compete very effectively and do really well. Meanwhile, I think WMT will continue growing its dividend for a long time to come.

    Glad to be a fellow shareholder here!

    Best regards.

  104. Mike,

    Yeah, I noticed that. A recent dividend increase and a drop in share price has combined to push the yield near 6.5%. It’s about 5% lower than my last purchase price, which is right about the level I start to look at averaging down. So I’ll probably buy more in July. Just depends on my cash flow and what other opportunities I see. I’m still liking most of the positions I’m building right now – TRV, UNP, WPC, etc. I’m hoping WPC continues to fall. Would love another 5% drop! 🙂

    Cheers.

  105. I have adding to my WMT position as part of my weekly purchases (about $100/$200 each week). The current prices around ~72s is very nice and using this opportunity to add more to this stock and also averaging down. I plan to continue to add WMT at these levels for a while as I build my position in the stock.

  106. DGJ,

    Definitely a good value stock here. At ~15 times earnings, WMT doesn’t need to do much to provide solid returns. I doubt we’ll see much of a P/E ratio compression from here, so it’s just a matter of WMT doing what WMT does best. Some buybacks here, SSS store growth there, and some additional sales through the new channels and new stores will likely all combine for very solid long-term total returns and dividend growth. Looking forward to seeing how it turns out!

    Cheers.

  107. Dm, you beat me again on price. I pais 72.66 to buy 50 shares on June 9th. It was also my first purchase of WMT in years. Cheers, DD

  108. DD,

    I may have just barely beat you on price, but you beat me by far in regards to the number of shares you picked up. I’d gladly trade. 🙂

    Keep up the great work. As long as WMT does what WMT does best, we’ll do well over the long haul here.

    Cheers!

  109. Also, Walmart, like Ford, has some family influence. When the big 3 crashed, the Ford family reeled back like a wounded animal and fought tooth and nail to keep their company from government hands. What resulted was grabbing Alan Mulally from Boeing and one of the greatest turnaround stories in a very long time. I see Walmart as also still having that same potential if ever put into a corner.

  110. Stephen,

    Good point there. The Walton clan still owns a very substantial portion (about half) of the company. And then you’ve got Berkshire as a major shareholder, too. The family seems to be pretty good stewards of shareholders’ capital and the company, so I’m not real concerned. The retail industry isn’t cyclical, and I think a lot of major retailers that have failed in the past just weren’t able to keep up with the times. I think WMT’s ability to adapt is really one of their strengths. But I suppose we’ll see where they’re at in a decade or so. No doubt that the industry is changing very quickly now. So this will be a great test of just how dominant they are.

    Best regards!

  111. I might have missed this, but looks for FY 15 that share buybacks have dropped tremendously vs FY 14 and 13. Is a repurchase program just ending possibly?

  112. Stephen,

    You’re right. The FY 2015 share buybacks did slow markedly. That was due to both the slowing of profit growth as well as the fact that the company paid $1.5 billion to buy out the rest (what they didn’t own) of Walmart Chile.

    Keep in mind that companies’ operations are fluid. No one year is exactly like the next. As such, dividend increases, buybacks, and everything else will oscillate.

    Cheers!

  113. Thanks DM for leading me onto the path of accumulating dividends for financial freedom.
    I am now into year 2, and my dividend income for this year is already 0ver 65% of what I received last year.

    Great to see substantial gains being made,and wish you all the best.

  114. DF,

    That’s fantastic. Congratulations on the progress. You’ve seen the light. 🙂

    Just a matter of rolling the snowball now. Stay consistent. Stick with it. Success begets success. The more dividend income you earn, the more you want to earn. So on and so forth.

    Stay in touch!

    Take care.

  115. Thanks for taking the time to reply.

    Its rolling faster and faster by the month.
    I have one question – what is your opinion on High yield – I have invested in an Oil Trust fund with a 30% yield. The fund runs until 2030. After 3 years my investment will have paid for itself. It is risky, but the fund must pay over 90% earnings to shareholders, and the dividend does fluctuate a bit, but it has multiplied my dividend income and I am able to re-invest in other more solid dividend champions on a far more regular basis than I otherwise could. Your thoughts on using this additional element in my portfolio would be appreciated. The position is not more than 2% of my portfolio. and I don’t intend adding to it, simply see it as a vehicle which has helped speed up my dividend accumulation strategy.

  116. DF,

    Not a fan of oil trusts. I don’t really understand why anyone would want to invest in an entity that is slowly being wiped out.

    For instance, PER and SDT are two oil trusts paying out 30%+ annualized yields. But their annualized returns since 2011 are both negative. That’s a horrible investment in a market that has witnessed one of its biggest runs in history.

    I honestly don’t know why anyone would want to see a 30% yield on the back of an investment that’s worth less and less over time. Defies logic. You’d be better off with almost any blue-chip stock or index fund and just withdrawing 30%. You wouldn’t do very well and you’d be quickly dwindling your wealth, but you’d be better off than what you’re getting with some of those trusts.

    Just my take on it. I’d be careful about being blinded by that high yield.

    Take care.

  117. Thanks for your viewpoint DM, I do resect your views greatly. It is PER that I have invested into. I will review and see if I can find a more suitable alternate. Good luck with the snowball.

  118. DM,

    Did you average down on WMT? Your portfolio says you own 45 but this post says you bought 7. I am new to dividend investing and have been following your blog and trying to wrap my mind around dividend investing.

  119. Saba,

    I’ve purchased WMT in three tranches over the years.

    I bought 20 shares at $51.52 in August 2010, 18 shares at $55.22 in May 2011, and then the most recent buy. So that’s how I came into possession of 45 shares. Took a while, but that’s where the patience comes into play.

    If you’re new to dividend growth investing or investing in general, I’d definitely recommend checking out some of the resources I’ve listed here:

    https://www.dividendmantra.com/getting-started/

    Cheers!

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