Walmart Inc (NYSE:WMT) increases its dividend to US$0.56

Walmart Inc. (NYSE: WMT) announced that it will increase its dividend on September 6 to $0.56. This makes the dividend yield about the same as the industry average at 1.9%.

Check out our latest analysis for Walmart

Walmart payment has strong revenue coverage

We like to see a healthy dividend yield, but that only helps us if the payout can continue. Based on the latest dividend, Walmart earns enough to cover the payout, but it’s 196% of cash flow. This indicates that the company is more focused on returning cash flow to shareholders, but it could mean the dividend is exposed to cuts in the future.

Looking ahead, earnings per share are expected to grow 30.7% over the next year. If the dividend continues to follow recent trends, we estimate the payout ratio to be 37%, which is within the range that allows us to be comfortable with the sustainability of the dividend.

NYSE: Historic WMT Dividend June 18, 2022

Walmart has a strong track record

Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2012, the first annual payment was $1.59, compared to $2.24 for the last annual payment. This implies that the company has increased its distributions at an annual rate of approximately 3.5% over this period. The slow and steady growth of dividends may not sound that exciting, but dividends have been flat for ten years, which we think makes it a pretty attractive offer.

Walmart may struggle to raise the dividend

Investors in the company will be happy to have received dividend income for a while. Unfortunately, Walmart’s earnings per share have remained essentially flat for the past five years, which means the dividend cannot be increased every year. Walmart is struggling to find viable investments, so it comes back more to shareholders. While not necessarily negative, it is a clear indication that dividend growth may be limited going forward unless earnings begin to pick up again.

Our Thoughts on Walmart’s Dividend

Overall, we still like to see the dividend increase, but we don’t think Walmart will make a great income stock. While Walmart earns enough to cover payments, cash flow is lacking. We don’t think Walmart is a great stock to add to your portfolio if income is your priority.

Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. At the same time, there are other factors that our readers should be aware of before investing capital in a stock. For example, we chose 5 warning signs for Walmart that investors should be aware of before committing capital to this security. Isn’t Walmart quite the opportunity you’ve been looking for? Why not check out our selection of the best dividend stocks.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

About Warren Dockery

Check Also

Endurance Technologies (NSE:ENDURANCE) next dividend will be higher than last year

Endurance Technologies Limited (NSE: ENDURANCE) announced that it will increase its dividend from last year’s …