WMT: To buy or not to buy?

[Dividendsrule]

One of the reasons I joined this forum was to get some good scoops and the skinny on what people thought about individual companies. I figure people posting on this forum are pretty intelligent and self educated investors and as such, I will try to create threads such as these, and hopefully contribute when I can.

Obviously WMT is a bit polarizing, some people think the growth of the past is done for, and not worth investing in. Others don't think so at all.

I am curious what the consensus is in this worthy forum.

I think that WMT has some great infrastructure, and the ability to evolve with the times. I am pleased with the fact that mgmt is investing in its employees and its e-commerce, and I don't mind a temporary hit to EPS while they try to establish themselves as a worthy opponent to what AMZN is doing. I also like that they are paying us while they do that in the form of the dividend, in contrast to AMZN which is basically telling shareholders, "trust us while we lose a lot of money".

I think it is ironic that big bad WMT is now being punished by the street for finally paying their employees more and trying to do some good.

To me the one thing that may be a weird wrinkle is the high ownership percentage of the Waltons. So there may be a buyout or privatization in the future? Although I think it is unlikely. And Vanguard, Blackrock, and Buffett all own a piece.

Anyway, I am curious to hear people's opinions on this topic. I think they can sell underperforming bits, use the brick and mortar to help with the supply chains, and as they said, they will keep growing the little smaller stores which will hopefully penetrate the smaller communities and provide groceries etc. I think down the line the can figure it out and grow earnings, buy back shares, and keep the dividend rolling and higher growth when inflation happens and costs rise. Most importantly, I think it is likely that they will be a stream of growing dividends for years to come. More honestly, I hope they are.

What do you think?

[navyasw02]

After buying individual stocks for a year now when I started DGI'ing, I've learned that the market is that changes in stock value are often irrational. Was the stock a good pick a week ago? Yes. Is Walmart going out of business? No. I'd wait for the initial turbulence to die out and then buy

[EricL]

I sold out of my WMT position in February after doing research for this article, and I have no regrets nor any interest in buying it at these prices.

Management just came out and told investors that earnings will be dropping in FY2017 and FY2018 before you might see some growth in FY2019.

Meanwhile, the dividend growth seems to be tapped out at about 35% of earnings. With the payout ratio at around 44% for 2015 and close to 50% on 2016 estimates, I don't see any meaningful dividend growth in the next 5 years.

I think WMT is seeing too many headwinds between rising labor costs, a strong dollar, and ever increasing online competition as the retail landscape changes. I don't think it will go the way of KMart or Sears, but do think it will be very difficult for the company to grow much at all due to its mammoth size and the headwinds I mentioned.

If I am going to live with 2% dividend growth, it will be from the likes of Realty Income or AT&T where I am getting paid 5-6% to do it. There are plenty of other stocks yielding 3.3% like Walmart with much better growth prospects.

[Dividendsrule]

I appreciate your article, and I appreciate your posting your point of view, Eric.

I think I am attracted to the "big boats", and I don't mind waiting until WMT accomplishes what they want to achieve. I want to get in on big retail without buying AMZN...And I like the tried and true WMT model, with their willingness to (try to) evolve into the future. You, and others are emphasizing a lack of growth, but I think I am more lenient...There have been periods of low growth in many of the blue chips on the DGI list, but that wasn't a reason to sell, in my opinion. As I recall there were a few years in a row in the 1980s when PG only raised the dividend a couple of percentage points a year.

If a person literally thinks there will be a structural change, that would probably be a reason to sell. Like for instance, let's say there was a glove that allowed people to wipe themselves in the bathroom, eliminating a large part of KMB's revenue stream. I am seeing WMT try to innovate to be a part of the future...Or, there might be a structural change killing their business, arguably?

So to your argument, with the churn and commoditization in telephony I could see T growth muted at 4-5%, plus all of their debt, and O can only grow as fast as they acquire more leases and raise rents, probably 4-5% long term max, but when WMT rights their ship again and figures out how to eat into AMZN, I could see double digit raises again (I hope). Plus when inflation really hits in a number of years in the future, and they can raise the prices and margins. Obviously "hope is not a strategy" but that is my thesis at this time.

EDIT: Lest we forget, lots of buybacks in the next couple of years too should boost dividend growth capabilities.

Again I appreciate your perspective.

Does anyone here think that WMT is an obsolete old dinosaur and absolutely going the way of the Dodo?

[Main Street Stock Investor]

(10-19-2015, 12:12 PM)Dividendsrule Wrote: I appreciate your article, and I appreciate your posting your point of view, Eric.

I think I am attracted to the "big boats", and I don't mind waiting until WMT accomplishes what they want to achieve. I want to get in on big retail without buying AMZN...And I like the tried and true WMT model, with their willingness to (try to) evolve into the future. You, and others are emphasizing a lack of growth, but I think I am more lenient...There have been periods of low growth in many of the blue chips on the DGI list, but that wasn't a reason to sell, in my opinion. As I recall there were a few years in a row in the 1980s when PG only raised the dividend a couple of percentage points a year.

If a person literally thinks there will be a structural change, that would probably be a reason to sell. Like for instance, let's say there was a glove that allowed people to wipe themselves in the bathroom, eliminating a large part of KMB's revenue stream. I am seeing WMT try to innovate to be a part of the future...Or, there might be a structural change killing their business, arguably?

So to your argument, with the churn and commoditization in telephony I could see T growth muted at 4-5%, plus all of their debt, and O can only grow as fast as they acquire more leases and raise rents, probably 4-5% long term max, but when WMT rights their ship again and figures out how to eat into AMZN, I could see double digit raises again (I hope). Plus when inflation really hits in a number of years in the future, and they can raise the prices and margins. Obviously "hope is not a strategy" but that is my thesis at this time.

EDIT: Lest we forget, lots of buybacks in the next couple of years too should boost dividend growth capabilities.

Again I appreciate your perspective.

Does anyone here think that WMT is an obsolete old dinosaur and absolutely going the way of the Dodo?

Dividends Rule,

IMO, I don't think WMT is irrelevant. It is a dividend aristocrat and a dividend achiever and I don't think it will lose that status any time soon. I own and trade WMT. Owned it for 20+ years. If I was taking a new position today, I would buy 1/3 of a full position now. If the stock moves >10% below initial purchase, buy second 1/3 position. There are other ways to ease in to a full position as well.

Early this year MCD, CVX, KO amongst other aristocrats were totally trashed in the media and forums. Guess what? Some of us made money on the trash talk. :-)

My last purchase of a partial position in WMT was 10/14/14 @$61.37/share.

Good luck in your investing.

M$$I

[Rasec]

Just my 2cents, I wasn't going to buy WMT at $75 for the same reason I'm still not going to buy at $58, and it'll be the same reason I still won't buy at $30. I don't like the company, the perception around the business model, I don't shop there neither I have ever recommend anyone to "go buy it at Walmart". I believe I went on the stores not more than a couple times, probably will never go back in again.

And don't think I'm being picky or fussy, I shop at Costco, Kroger, etc.

I see WMT the same way I see MCD, I don't like it, I don't buy it!

[pyfish]

I shop at Walmart occasionally and the few that I've been to appear to be doing well. I've bought a 1/5 position for now, waiting for another 10% drop. The major growth area that WMT is targeting is obviously online shopping. I'm counting on WMT making reasonable progress in online sales within the next year. The easiest way to do research is to be a consumer myself. If the online consumer is poor or not competitive by this time next year, then I will probably cash out.

[Dividendsrule]

Reasonable enough, PYfish. Thanks for your feedback, M$$I. Rasec, I dig your style but as an intelligent, self directed investor, you do not represent most people in America, or the world, for that matter. Most people live paycheck to paycheck and shove all sorts of crap in their mouths and go to the store and buy stuff on a whim.

I made my own washing detergent for over year to try to get a sense of PG's economies of scale (and to be frugal)...Most people aren't like me and have no problem going for burgers and buying 64 packs of orange soda at WMT.

Disclosure: Very, very long MCD and longish WMT.

[rayray]

I've been struggling on this company for a long time. Every time I go into a Walmart owned store, whether Sam's Club or a Walmart I hate the experience, at least in my area. I'd rather spend a few extra dollars and go to Costco, Target, Home Depot, Lowes or a Whole Foods. The good news is that the company knows they have a problem and are willing to address their issues. Having said that, if and when the yield gets to 3.5%, I'll think about it, if it gets to 3.75+% I'll think about it some more.

[ronn38]

Polarizing to say the least--a little like PM in that way ;-)

Avoiding any ethic's debate, suffice to say I believe WMT is taking steps to address the public image in regards to its corporate behavior.

Financially, I agree WMT will have challenging years ahead of it, but I think scale is on its side. And when WMT gets its on-line presence sorted out, there will be considerable upside.

Now, it maybe prudent to wait out the "challenging years" and invest when the "upside" starts; but my magic 8 Ball is the best, so I'm comfortable with the 1/4 position I initialed at this time.

Just my 2 cents...

Ronn

[Rasec]

But do you think the typical WMT buyer will actually buy online at some point? Or when this laggard move to online happens, someone else will capture that client (Amazon, Target, even Google)?

One thing is having massive sized stores everywhere and hard discounts to attract a certain part of the population. The other, completely different, is expecting these customers to stay loyal online AND being able to manage and understand data (big numbers).


Online shopping is more about managing data than it is about retail!

[Main Street Stock Investor]

WMT will see the same action as MCD did today. Don't know when, but it will happen. In it for the long haul. Long MCD and WMT.