Are Walmart Figures So Bad That You Need To Sell The Stock?

As a long-term investor in Walmart, I have seen many ups and downs of the stock in recent years. Today's sell-off will not change my attitude in this great company.

The reason why I'm long in Walmart is its deep value and roots to the US economy. Remember, Walmart has over USD 485 billion in annual sales. The next biggest competitor (Costco Wholesale) generated sales of USD 129 billion and Amazon USD 177 billion.

Walmart is a Dividend Champion with solid growing financials and 44 years of consecutive rising dividends. The current hike is very small, only 2% and may reflect the increasing pressure from decreasing earnings.

For sure, Walmart doesn't grow at a high rate and got pressure from online retailers like Amazon, but it doesn't mean that they will be killed by them.

And Wal-Mart still has room to grow dividends or run them flat until they have developed their own online sales tool to boost earnings.

WMT Revenue (TTM) data by YCharts

WMT Normalized Diluted EPS (TTM) data by YCharts

A Look at the debt in relation to Walmart's EBITDA gives us a feeling of the financial stability. The ratio is often used to evaluate the leverage of a company. The figure amounted to 1.4 for Walmart; a very solid number.

WMT Financial Debt to EBITDA (TTM) data by YCharts

Walmart's management released a fiscal year 2019 EPS guidance between $4.75 and $5 per share. Analysts estimated a slightly lower value. The consensus estimate was $5.13.

A main trigger for today's sell-off was the drop in online sales. The company reported e-commerce sales of 23%, compared to 50% in Q3 and 29% a year earlier. But its growth should come back to 40% this year.

Comparable sales - a key figure for retailer

Comparable sales could develop into bigger problems for an inflexible business model with high fix costs. If you have a big cost basis and your customer traffic slows; your earnings are in free fall.

Comparable sales for Q4 grew by 2.6%. Not bad in my view, especially when you consider that this was the 14th consecutive increase in the US market. So, what's the reason for the deep sell-off today?

In my view, there are three reasons:
- A high valuation which is not supported with higher growth
- Slowing and not accelerating online sales
- The expansion into e-commerce cost money and creates losses.

Let's take a small look at the current valuations from Walmart:

WMT PE Ratio (TTM) data by YCharts

I guess, the recent stock price increase from around 70 bucks to around USD 100 in 2017 (new all-time highs), was driven by hopes that Walmart has a concept against Amazon and could develop its own business into a fast growing multi-channel-retail machine.

Those hopes got trashed with the Q4 report. But does it mean that Walmart could not develop a wonderful online retail business over the next years? Definitly not!

The current sell-off is hard for an investor, especially when you bought the stock over USD 100. An EPS in 2019 of 5 dollar would mean that your initial investment has a P/E of 20.

For a slow growing stock like Walmart, who increased sales over the past 10 years by roughly 30%, is this ratio too high, especially when you consider that earnings run flat.

Conclusion

The capital market participants are very short-term orientated and focused on popular investment themes. For the retail industry means this: Go long online and short offline. The big money is betting that online will kill offline retail.

I don't think that this will happen. I believe the future is a mix of both, a kind of multi-channel. Amazon bought Whole Foods as a result of this idea. Without physical stores, you will not be a future player in retail.

Today's figures showing not a big growth but they are not as bad as the sell-off suggests. If investors think the valuation is too high, they should take a few chips off the table but Walmart is still a solid pick in the retail industry with a nice buyback and dividend yield close to 5% combined.

These Long-Term Dividend Growth Stocks Go Ex-Dividend Next Week

Dividend Growth Stocks Of The Past Week

16 Long-Term Dividend Growers At Reasonable Prices

A very, very famous investor once said that he liked to buy excellent businesses at 'reasonable prices.' I like to think that I am of the same mindset. A strategy of mine is to look for such businesses with real competitive advantages, but ones that are dividend payers and dividend growers.

My watch list now includes a couple hundred stocks, all of which are dividend payers. Today I'd like to share a small list of those which I believe retail income investors can buy 'off the shelf' right now.

These are the results...

20 Cheapest Large Cap Buyback Opportunities

It’s that time of year again — the time of year when companies ramp-up their stock buyback activity as they realize they’ll have enough cash to fund those efforts, and/or just to make sure they reach their internal buyback goals.

When corporations are profitable and established, they tend to return capital to shareholders. This can be achieved via stock buybacks to shrink the float and to support the stock, or it can be done via one-time dividends or by raising their annualized quarterly dividends. Both are activities I do cover on this blog on a regular basis.

Many investors love the cash flow from dividends. After all, dividends can contribute up to 50% of total returns through time. Other investors prefer for companies to buy back their common stock. But a good alternative is to combine both shareholder friendly activities.

When picking out companies that will be buying back the largest number of shares in 2016, several things have to be considered. First and foremost, a company had to be willing to spend billions of dollars to buy its shares. Such companies also have to have a history of conducting stock buybacks, or they had to have a solid reason why they would be so aggressive in buying back stock this year alone.

As for which stocks are particularly well-positioned to be the beneficiaries of corporate buyback efforts, investors may want to put the following names on their radar. Attached you will find a selection of the 20 cheapest large cap stocks with a buyback announcement during the past 12 month.

These are the results...

6 Solid Dividend Stocks With Healthy Balance Sheets And Growth Perspectives

Companies that pay well above average dividend yields tend to have problems such as slowing growth or weaker balance sheets.

However, that high yield is the reward investors can earn by taking on a bit more risk. That said, sometimes the risks are not as bad as the market thinks, which makes the reward well worth it.

Attached you will find a couple of great dividend growth stocks with a healthy balance sheet and rosy growth persectives. Above all, the current price multiple, measured by forward P/E is at an acceptable level.

Here are 6 stocks that we think fit that profile....

14 Dividend Paying Stocks With Low P/E's And High Returns On Invested Capital

I built a screen that I would like to share that acts as a starting point in identifying quality stocks that have great historical returns on invested capital and relatively low current valuations.

Only companies that had a market cap over $1 billion and headquarters located in the U.S. were included.

I used EBIT as the earnings metric, so it is not a perfect after-tax return on invested capital. I calculated invested capital two ways, one with goodwill, and one without goodwill.

In addition, each of stocks has a low forwad P/E, a positive dividend yield and payout ratios below 52 percent. The return on assets is between 7.50% and  32.70%.

14 stocks fulfilled my critera.

These are the results...

14 Dividend Paying Stocks With Low P/E's
And High Returns On Invested Capital
(click to enlarge)

10 Top Stocks With The Highest Shareholder Yield In The S&P 500

Dividends are good but they need to be paid from real earnings. Sometimes, companies pay more than they have on their bank accounts due to growth costs or reinvestments.

You will also find often stocks that pay only a small amount of their annual income back to shareholders. 

Good companies with no growth costs will consider paying the rest of the income via share buybacks.

Within the financial scene we discuss the theme shareholder yield, a ratio that quantifies the dividend yield and buyback yield as a whole.

It's quite simple, the bigger the shareholder yield, the more money being paid back to the owners of the company.

Attached you will find the 10 stocks with the highest shareholder yield of the current month.

These are the results...

10 High Quality Growth Dividend Contenders Looking Really Cheap

Long term orientated investors need growth to lift its portfolio value. 

Dividends are good but the real boost will come from growth. Only growth can make you rich in the long term.

Today I've screened the Dividend Contenders by cheap stocks with double-digit earnings growth for the next five years.

Exactly 10 stocks fulfilled the following criteria:

- Market capitalization over 2 billion
- Low forward P/E of less than 15
- EPS growth for the next five years over 10%
- Positive return on assets
- Debt/Equity under 1

Here are the results...

10 Stocks With The Highest Shareholder Yield As Of July 2016

Top 10 Net Payout Yields For July 2016;
Source: Seeking Alpha

9 Low Debt Stocks With Yields Over 3% And Double-Digit Earnings Growth

As a forward looking investor, I'll take a deeper look into the fundamentals of a company. 

If I see that there are solid debt ratios and modest growth at high margins, then I should take a second look at the valuation of the company.

If I also get a high initial yield, it could be a perfect income stock for my passive income portfolio. That's the ideal theory. 

The truth is that each stock can develop into another direction which is not of benefit for you.

But we don't want to assume this case and look at the normal way.

Today I would like to introduce those stocks with double-digit earnings growth forecast for the next five years that offer a fantastic 3% plus dividend yield for your portfolio.

I've selected only stocks with a debt-to-equity ratio below one and return on assets over 5 percent. In addition, each of the attached stocks has a low forward P/E of less than 15.

Exactly nine companies fulfilled these tight criteria of which three are high-yields.

Here are the results…

10 Best Stocks By Shareholder Yield As Of June 2016

The top 10 list saw very minor shifts for June typical of the months when a limited amount of quarterly updates exist on stock buybacks. 

In fact, no stock shifted more than one spot on the list with American Airlines topping the list for a second consecutive month. 

With the increased position of United Airlines, the list is now highly focused on the airline, technology, and financial sectors. The average yield gained without any new company joining the list due in part to the monthly loss. The amazing part is that the top four yielding stocks exceed 20% yields.

These are the 10 Top stocks by net payout yield as of June 2016...

20 Stocks With A Billion Dollar Buyback Program And Yields Over 2%

Let me ask you this: Would you rather buy a 10-year Treasury, which currently yields about 2%, or would you rather buy a large-cap stock with a 2% dividend yield, a billion-dollar stock buyback program, and share appreciation potential? 

With bond yields as low as they are, there's no contest. The Fed's zero interest rate policy has created a situation where there's nowhere to go except the stock market. 

Of course, the story will change once the Fed raises interest rates, which will make it more expensive for companies to borrow on the bond market. So there is a raging debate about when that will happen.

It is always better to own stocks in such situations. Those can hedge you against inflation. Fur sure, stocks are risky but if you look at the values of a company, and you avoid the big risks by not taking very cyclic stocks into your portfolio, you should be rewarded with a solid return.

Here are some alternatives with yields over 2% and a current buyback program worth over a billion dollar...

17 High-Yielding Dividend Growth Stocks For Passive Income Investors

When it comes to investing, there's arguably no better way to let the magic of compounding returns do its work than by purchasing and holding solid dividend stocks.

But while some high-yielding dividend stocks might appear attractive at first, they might not be built to last if strife in the business requires reducing or eliminating their juicy payouts. 

Attached you will find a selction of stocks with a rosy long-term persective while paying high dividends now. In short, you can name them high-yielding dividend stocks investors don't need to care about.

Here are the highest yielding results in detail...

20 Stocks With At Least One Billion Share Buyback Plan In 2016

When corporations are profitable and established, they tend to return capital to shareholders. 

This can be achieved via stock buybacks to shrink the float and to support the stock, or it can be done via one-time dividends or by raising their annualized quarterly dividends.

In my blog, I often cover successful long-term dividend growth stocks. Those companies managed to raise dividends over a decade or half century.

I also talk a little about buyback stocks. Those gave more money back vie share repurchases which is in the end the same.

Today I would give you a short introduction into the biggest share buyback announced from the current fiscal year 2016.

As of now, we've noticed 94 companies with fresh, new, or increased buyback plans.

Here are the biggest announcements from fiscal 2016 to date...

Which Stocks To Buy In Market Corrections - 40 Best Dividend Growth Ideas Now!

When the market falls, it tends to drag everything down -- good or bad companies. I think that companies that have increased their dividends by 10% or higher in the last 10-years should be considered good companies. 

One way to combat the market downturn is to buy high growth dividend-growth companies that are fairly valued or undervalued. 

These companies are expected to grow earnings per share at a rate higher than 5% in the foreseeable future and have a history of increasing dividends with payout ratios of less than 60%. 

In addition, I like to invest into low leveraged companies. If rates rise or money is needed for investments, the company doesn’t need to raise capital. It's also a hedge for rising dividends.

I also look for stocks with a midcap market valuation or higher. I love the diversification and developed status of those companies.

63 stocks fulfilled my criteria. I like to show you only the 20 best yielding. Half of them have a beta higher than the market. They seem to be more risky.

For safe heaven investors, I also attached a list of the 20 best yielding stocks with a beta below one. Hope you have some fun by discovering the lists. If you like my work, please subscribe to my free newsletter by leaving your email in the right box above. Thank you for reading. 

These are the results...

21 Dividend Achiever With A Single P/E

Valuation is a key element when you consider putting money into stocks. A high valuated stock should also have high secured growth. If not, you might overpay the stock.

But a cheap valuation could also indicate the corporate is significant shrinking.

Each investor needs to evaluate the risk of the stock.

Today I like to show you the cheapest stocks below the Dividend Achievers. Those stocks have risen dividend year over year for a decade without a break and offer a single forward P/E.

21 Companies have such a low valuation measure. Attached you will find the complete list with a few essential fundamentals.

Here are the top yielding stocks in detail...

18 Best Dividend Growth Stocks For The Long Term

The best dividend stocks pay rising dividends year after year. These are typically well known businesses with long dividend histories.

But that's not all. You have to look at much more than on consequent paid dividends. You must look at debt ratios, growth figures, valuation levels, and much more.

However, global economic headwinds are leaving investors perplexed about which stocks to bank on. The markets have been on a roller coaster ride in the recent past – either due to the flagging Chinese economy, the Eurozone debt crisis or the U.S. Federal Reserve’s pending decision over the first rate hike. Moreover, weakness in the energy sector and a strong dollar are nagging concerns.

We have to focus on stocks with long-term potential to avoid short-term problems. Today's screen is long-term orientated. I've put my focus on the best 5 year earnings growth forecast.

These are my screening criteria in detail

- Dividend Achiever Member (over 10 year's consecutive dividend growth)
- 5 Year Predicted EPS Growth Over 5%
- Market Cap over 2 Billion
- Forward P/E under 15
- Debt/Equity under 0.5

18 stocks jumped on my screen. The results can be found at the end of this wonderful article.

Here are the 5 top yielding results...

40 Cheapest Dividend Growth Stocks By P/E And PEG

Value investors have a strong focus on stocks with a low valuation compared to its expected earnings. A very popular tool for investors to identify an undervaluation is the P/E ratio.

The P/E ratio often looks cheap but they are cheap for a reason. Mostly a dying operating business is responsible for the low P/E. On the other side, a high P/E could show that we have to deal with a high-growth company.

This general problem could be solved with the PEG ratio. By definition, it describes the value compared to its growth or Price-Earnings-To-Growth Ratio.

Definitions

The P/E ratio is simply: Price / Earnings
Essentially, this tells you how much an investor is willing to pay for each unit (year) of earnings. If a stock is trading at a P/E ratio of 30, it is said to be trading at 30x times its annual earnings.

In general, the lower the P/E ratio the better. A common threshold for many investors is a P/E of 20 or less. (For the record, at the time of this writing, the S&P 500 Index was trading at a P/E (using F1 Estimates) of 15.33.)

A PEG ratio is the: P/E Ratio divided by the Growth Rate

Conventional wisdom says a value of 1 or less is considered good (at par or undervalued to its growth rate), while a value of greater than 1, in general, is not as good (overvalued to its growth rate).
Many believe the PEG ratio tells a more complete story than just the P/E ratio. (The S&P at the time of this writing had a PEG ratio of 1.93.)

Comparison

Let's take a look at both of these in action.
For example: a company with a P/E Ratio of 25 and a Growth Rate of 20% would have a PEG ratio of 1.25 (25 / 20= 1.25).

While a company with a P/E Ratio of 40 and a Growth Rate of 50% would have a PEG Ratio of 0.80 (40 / 50= 0.80).

Traditionally, investors would look at the stock with the lower P/E ratio and deem it a bargain (undervalued). But looking at it closer, you can see it doesn't have the growth rate to justify its P/E.

The stock with the P/E of 40, however, is actually the better bargain since its PEG ratio is lower (0.80) and is trading at a discount to its growth rate.

In other words, the lower the PEG ratio, the better the value. That's because the investor would be paying less for each unit of earnings growth.

So which one is better?

They both have their usefulness. I do like how the PEG positions the P/E ratio in relation to its growth rate to put everything into perspective.

Quite frankly, I use both, so I'm going to say it's a tie. Plus, you couldn't even create the PEG ratio without the P/E.


Attached you can find the 20 cheapest dividend growers by PEG and P/E. The results include only stocks with a constant dividend growth history of at least 10 years. They are classical Dividend Achievers.

Here are the results:

How You Find Really Good Dividend Bargains On The Market

What to look for when your try to find real dividend paying bargains that might deliver a solid return in the future? I've compiled a few essential factors to look at when you put your money into the market.

Once you've identified stocks that appear cheap for reasons that aren't company specific, it's time to do a little more digging. 

For starters, you'll want to ask the following questions:

- Does the company have a strong history of increasing its dividend? There are many companies that have increased their dividends for decades, but it's not a requirement. You simply want to verify that the company makes an effort to increase shareholders' income over time, and doesn't have a history of dividend cuts or suspended payments.

- Does the company have a reasonable payout ratio that will sustain the dividend? A payout ratio tells you how much of the company's income is paid out as dividends, and the lower this number is, the easier the dividend is to sustain. For example, if a company earns $3.00 per share and pays a dividend of $1.00, its payout ratio is 33% -- which leaves plenty of room for increases, as well as a nice cushion if income suffers during a recession.

- Is the company's debt load reasonable and manageable -- even if times get tough? A "reasonable" debt load is open to interpretation, and some companies can responsibly borrow more than others. A good metric to look at is the company's interest coverage, which tells you how much the company earns for every dollar in interest expenses. For example, if a company's interest coverage is five-to-one, it can absorb a huge drop in revenue before paying its debt becomes a problem.

- Is the company's income steady and (reasonably) predictable? While it's impossible to accurately project a company's future income, there should be a steady pattern of earnings growth, as well as absorbing tough times without much of an earnings drop.

However, attached are 20 dividend growth stock ideas that might fulfill some of the criteria to find an attractive investment target.

There is no perfect stock but some companies come close to it.

Which companies to you like?