Saturday, 23 February 2013

A Look at Wal-Mart Stores


You’ve probably already noticed that Wal-Mart Stores increased its dividend by 18% on Thursday. Not too shabby!

So let’s have a look at the numbers…

Average Dividend Yield Analysis*

WMT-N
Year
High Price
Low Price
1Q Div.
2Q Div.
3Q Div.
4Q Div.
Annual Dividend
High Yield
Low Yield
2001
$58.75
$42.00
$0.06
$0.07
$0.07
$0.07
$0.27
0.64%
0.46%
2002
$63.94
$43.72
$0.07
$0.075
$0.075
$0.075
$0.30
0.67%
0.46%
2003
$60.20
$46.25
$0.075
$0.09
$0.09
$0.09
$0.35
0.75%
0.57%
2004
$61.31
$51.08
$0.09
$0.1300
$0.1300
$0.1300
$0.48
0.94%
0.78%
2005
$54.60
$42.31
$0.1300
$0.1500
$0.1500
$0.1500
$0.58
1.37%
1.06%
2006
$52.15
$42.31
$0.1500
$0.1675
$0.1675
$0.1675
$0.65
1.54%
1.25%
2007
$51.44
$42.09
$0.1675
$0.2200
$0.2200
$0.2200
$0.83
1.97%
1.61%
2008
$63.85
$43.11
$0.2200
$0.2375
$0.2375
$0.2375
$0.93
2.16%
1.46%
2009
$57.51
$46.25
$0.2375
$0.2725
$0.2725
$0.2725
$1.06
2.28%
1.83%
2010
$56.27
$47.77
$0.2725
$0.3025
$0.3025
$0.3025
$1.18
2.47%
2.10%
2011
$60.00
$48.31
$0.3025
$0.3650
$0.3650
$0.3650
$1.40
2.89%
2.33%
2012
$77.60
$57.18
$0.3650
$0.3975
$0.3975
$0.3975
$1.56
2.72%
2.01%
2013


$0.3975
$0.47
$0.47
$0.47
$1.81


2014


$0.47
$0.47
$0.47
$0.47
$1.88


Stock Prices and dividends are per calendar year.
12y ave
1.70%
1.33%
Dividends are recorded in the quarter they were paid.
5y ave
2.51%
1.95%







3y ave
2.70%
2.14%







5y
$75.01
$92.90







3y
$69.74
$84.29






Super Cheap
$64.99



The table shows the 3 year average dividend yield to be 2.70% ((2.47% + 2.89% + 2.72%)/3). I use the numbers in the “High Yield” column for obvious reasons.

Using the current annual dividend of $1.88, one would have to pay $69.74 for a 2.70% dividend yield.

Buying the stock at its low in 2011 would have earned you an initial yield of 2.89%. Using the current annual dividend, that corresponds to a stock price of $64.99 today (see “super cheap” price in the table above).

Graham Price

WMT’s 2010, 2011 and 2012 EPS were $3.72, $4.18 and $4.54. 3Y Ave EPS = $4.15.
WMT’s BV is $22.00.
Graham Price = SQRT (3Y Ave EPS * BV * 22.5) = $45.31

Cyclically Adjusted Price to Earnings Ratio

WMT’s 10Y Ave EPS = $3.08
CAPE = Stock Price / 10Y Ave EPS = $70.40 / $3.08 = 22.9
A CAPE below 20 is good.

Conclusion

WMT increased EPS from $1.50 in 2002 to $4.54 in 2012. That’s an increase of 3.02 times over 10 years. In 2012, Buffet bought 793,000 shares of WMT at an average price of $57.

I would consider adding WMT to my portfolio if the share price came down a few dollars – say $66-$68.


*My method is not perfect as the stocks low price may have occurred before the annual dividend increase.