Wal-Mart belongs in your shopping cart

With a stealth rally under way in its shares, now is the time to start buying them.

By TheStockAdvisors Nov 2, 2011 9:13AM

By Chuck Carlson, The DRIP Investor

Wal-Mart (WMT) deserves some love. Yes, I know the stock is trading where it was 10 years ago. I know lots of people view it as the quintessential evil corporation. And I know it's hard to grow a company with revenue near half a trillion dollars.

But I also know the stock is beginning to put on one of those stealth rallies that investors ignore at their own peril. In my view, it's time to put Wal-Mart stock in your shopping cart.


Post continues below.

The stock is near its 52-week high of $57.90, and I think these shares will eclipse that level. And investors get paid nicely while they wait for a stock breakout, as the issue yields 2.6%.

There's no denying Wal-Mart is a behemoth. The company accounts for approximately 11% of U.S. retail sales. If Wal-Mart  were a country, its annual revenue would make it among the top 25 national economies in the world.

Despite its size, Wal-Mart has been able to grow profit and revenue every year for the past decade, a feat that seems to be ignored by investors who clamor for even more growth.

To be sure, Wal-Mart's U.S. same-store sales, a popular measuring stick for retailers, have declined for nine straight quarters. Still, Wal-Mart may be reversing the downward trend.

Monthly same-store sales have increased in July, August and September, so there is hope that the quarter ended in October will show a slight improvement in same-store sales.

The company has been able to offset sluggish U.S. sales by expanding overseas. International sales rose 12% in fiscal 2011.

 

Wal-Mart has outlets in growing economies such as Brazil and China. The company recently acquired a 51% stake in Massmart, a retailer in 14 African countries.

Wal-Mart's valuation is reasonable. The stock trades for less than 13 times the fiscal 2012 earnings estimate of $4.49 per share.

Wal-Mart has beaten the consensus estimate in each of the past three quarters, so the current fiscal-year estimate may prove conservative.

Dividend investors should take heart in the company's willingness to boost the payout at a rapid clip. Indeed, the dividend was increased roughly 21% at the beginning of this year and has more than doubled since 2006.

Wal-Mart typically boosts its dividend early in the year, so look for another double-digit increase in early 2012.

Wal-Mart fits the profile of stocks that should hold up well in this market -- large, dividend-paying stocks that are trading at reasonable valuations and have some operating momentum.

Investors should consider nibbling at current prices and use any dips to add more aggressively to positions.

Wal-Mart offers a direct-purchase plan whereby investors may make their initial investment directly from the company. Minimum initial investment is $250. Worth noting is the IRA option available in the company's plan.

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Tags: WMT
5Comments
Nov 2, 2011 10:15AM
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Yes they just shifted more of the healthcare cost to their employees to the tune of 80% increase in the all ready sky high premiums. Ya corporate greed!
Nov 2, 2011 12:20PM
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I worked for Wally World for about 15 months, as a PT job.  Obviously, it is very easy to "shine" as an outstanding employee, due to the caliber of people they hire.  It was a decent PT job, but to have it as my only job & income, would completely suck.

 

The reason I left, is they said my day job was a conflict of interest with Wally World (after being there 15 months); and, I needed to choose.  What frickin' job ISN'T in conflict with Wally World?!?!  

 

Now, I only shop Wally World if I cannot get the same/similar product elsewhere for a reasonable price.  Winco Foods is now the only place I will get grocery items.

Nov 2, 2011 11:29AM
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I hate wal-mart! They stole all the small American buisness and under cut them ,not to mention the way they treat thier employees like slaves.
Nov 2, 2011 4:39PM
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It is easy for many to slam the company.  Fact is,  many rely on their fair prices and one-stop shopping. 
Nov 2, 2011 11:37AM
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I would never support Wal-Mart in any way, including buying their stock.
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