Wal-Mart (WMT) Raises Dividend by 2.0%
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Just the other day, we were celebrating a double digit raise that will increase our income for years to come.
Now a week has passed, and we are learning about yet another raise! So what gives?
These raises are not from my employer for my full time job. Instead … they were given to us from the companies that we own shares of stock in.
We currently own shares of stock in over 30 different dividend paying companies.
Some companies pay us over $200 in dividends a year, while others pay us less than $2 a year. The sum of all these companies will pay us close to $2,400 in dividends this year alone!
The most recent dividend increase (or raise) from a stock we own was from Wal-Mart (WMT).
WMT Shareholders Get a 2.0% Raise
Wal-Mart (WMT) recently announced an annual dividend increase. The company has been consistently raising annual dividends for over the past 40+ years!
That is usually the sign of a top notch dividend stock … when a company has helped their shareholders increase their income for that long of a time.
Company shareholders will now receive $0.51 in quarterly dividends for each share they own … instead of $0.50 paid previously. This increase comes well below our desired dividend growth rate of at least 6%.
The latest increase bumps the annual dividend for WMT up to $2.04 per share compared to $2.00 last year.
Overall, that is a 2.00% increase in dividend income.
How Much Extra Income?
We currently own 53.683 shares of WMT in our Money Sprout Index.
This latest dividend increase has pushed our 12 month forward dividend income for WMT up to $109.51, compared to $107.37 last year.
That is an annual dividend income increase of $2.15 – (not much but it is an increase to our income).
This is yet another reminder that our dividend income stream is constantly growing every single day … without any extra work from us … no matter how large or small the increase.
With this latest increase by Wal-Mart, along with recent stock purchases and dividend reinvestment … our annualized forward dividend income has risen to $2,307.43.
Dividend Growth for WMT
We have owned shares of Wal-Mart for almost 3.5 years.
Overall, the company has grown their dividend during that time … but at a very slow rate compared to other companies that we own.
Take a look at the annual dividend payments since 2012 –
- 2012 – $1.558
- 2013 – $1.808
- 2014 – $1.910
- 2015 – $1.950
- 2016 – $1.990
- 2017 – $2.030 (projected)
Note – The 2017 dividend has been adjusted to reflect the annual increase coming after the 1st quarter payout.
As you can tell from the numbers above, WMT dividends have been raised consistently over the past several years.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher. Wal-Mart has been able to sustain a dividend growth rate but nowhere close to the 6% (or higher) that we look for in a stock.
Here are a few average growth rates for shares of Wal-Mart –
- 1 Year DGR – 2.01% (2016 to 2017)
- 3 Year DGR – 2.05% (2014 to 2017)
- 5 Year DGR – 5.57% (2012 to 2017)
Wal-Mart – Buy, Sell, or Hold?
We started buying shares of Wal-Mart back in December of 2013.
Since that time, we have earned $130.66 in dividends from the company. Since we own these shares in our LOYAL3 account, there is no option for DRiP – therefore no additional shares have been earned from dividends.
Note – Even though we don’t have DRiP for our WMT shares, we have used our dividends to fund other purchases.
Here are a few stats from over the years of buying stock in Wal-Mart –
- Total Investment – $3,710.00
- Shares Purchased – 53.683
- Dividends Earned – $130.66
- DRiP Shares – 0.00
At the time of this writing, WMT does NOT meet our stock screen criteria based on the following metrics –
- Current Yield – 3.00%
- Payout Ratio – 43.38%
- P/E Ratio – 14.48
The company meets the current yield requirement of being greater than (or equal) to 2%. In addition, the payout ratio is less than 60% and P/E ratio is under 20 – which we look for. But the dividend growth rate of 2% the past several years is a big concern.
There are plenty of other companies, such as Target (TGT), that are much more attractive when it comes to dividend growth. It certainly requires a good balance when picking dividend growth stocks – current yield versus growth rates.
Based on all of this, we have WMT as a solid HOLD. If at anytime, the company were to cut their dividend … we would sell our shares immediately.
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – TGT and WMT. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.