Some investors rely on dividends to grow their wealth. If you are one of these dividend sleuths, you might be interested to know that Walmart Inc. (NYSE:WMT) will trade ex-dividend in just 4 days. The ex-dividend date is one business day before a company’s record date, when the company determines which shareholders are entitled to a dividend. The ex-dividend date is an important date to keep an eye on, as any purchase of the stock on or after that date may mean a delayed settlement that will not appear on the record date. So, you can buy Walmart shares before August 16th to receive the dividend that the company will pay on September 3rd.
The company’s next dividend payment will be $0.2075 per share, after the company paid out a total of $0.83 to shareholders last year. Last year’s total dividend payments show that Walmart has a yield of 1.2% on the current share price of $67.95. Dividends are an important source of income for many shareholders, but the health of the business is critical to maintaining those dividends, so readers should always check if Walmart has been able to grow its dividends, or if the dividend is at risk of being cut.
Check out our latest analysis for Walmart
Dividends are usually paid out of company earnings. If a company pays more in dividends than it earned in profit, the dividend may not be sustainable. That’s why it’s good to see Walmart paying out a modest 33% of its profit. However, even highly profitable companies sometimes don’t generate enough money to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 43% of its free cash flow as dividends, a comfortable payout level for most companies.
It’s positive to see that Walmart’s dividend is covered by both earnings and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio usually means a greater margin of safety before the dividend gets cut.
Click here to see the company’s payout ratio as well as analyst estimates of its future dividends.
Have earnings and dividends increased?
Companies with strong growth prospects tend to be the best dividend payers because it’s easier to increase the dividend when earnings per share are improving. If the business hits a slump and the dividend is cut, the value of the company could drop rapidly. That’s why it’s reassuring to see Walmart’s earnings soaring 25% per year over the past five years. Earnings per share have grown very quickly, and the company is paying out a relatively small percentage of its earnings and cash flow. This is a very favorable combination that can often result in the dividend multiplying over the long term as earnings grow and the company pays out a higher percentage of its earnings.
Many investors judge a company’s dividend performance by how dividend payments have changed over time. Over the past 10 years, Walmart has increased its dividend by an average of about 2.6% per year. It’s encouraging to see that both earnings and dividend have improved — although the former has increased much faster than the latter, possibly because the company has reinvested more of its earnings in growth.
Last Takeaway
Is Walmart worth buying for its dividend? Walmart has grown its earnings at a rapid pace and has a conservatively low payout ratio, meaning the company is reinvesting heavily in its business; an excellent combination. It’s a promising combination that should make this company worthy of a closer look.
Given that Walmart has an attractive dividend, it is important to know the risks associated with this stock. For example – Walmart has 2 warning signs In our opinion, you should be aware of this.
A common mistake when investing is to buy the first interesting stock you see. Here you can find a complete list of high dividend stocks.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
