Wal-Mart Stores (WMT) is set to report earnings tomorrow. What I will be paying attention to is not so much the earnings but the possible dividend announcement. Wal-Mart is a veteran when it comes to rewarding shareholders with dividends. They have been paying and increasing their dividends for roughly 35 years. Over the past 10 years, the compound annual growth rate of the dividend has been 18.5%! Over the same period, WMT's share price has not performed in a similar fashion, thus value has been building up. This may be the reason why Warren Buffett has been increasing his stake in the company.
Through the deepest and darkest hour of our economy, Wal-Mart managed to raise the dividend by 8% in 2008 and 15% in 2009. Given this track record, I would estimate that at least a 10% rise in dividend payment is likely. Click here for historical dividend and stock splits.
Would I be buying it now? It depends. The shares of WMT are not extremely expensive but since it ran up from the $50 range when I wrote about it in September 2009, I would suggest a pull back to that range before buying. If you are excited about this company and wish to buy right now, then I suggest you divide your buying in two parts. Buy the first portion now and wait for a 20% decline to buy the second half.
The key point is that quality companies that pay and increase dividends consistently tend to become great investments when they appear on our watch list. Not all companies are to be bought but our list is a great starting point for any conservative investor or aggressive trader. - Art