Linked here is a detailed quantitative analysis from Wal-Mart Stores, Inc. (WMT). Below are some highlights from the analysis linked above:
Company description: Wal-Mart Stores, Inc. is the largest retailer in the world and operates a chain of over 10,000 discount stores, wholesale clubs, supermarkets and super centers.
Fair value: When calculating the fair value, I take into account the differential fair value of the present value MMA along with these four fair value calculations. A detailed description can be found on page 2 of the linked PDF:
1. Avg. High yield price
2. 20-year DCF award
3. Avg. P / E price
4. Graham Number
WMT trades at a discount of only 3.) above. Including the NPV MMA differential, the stock is trading at a premium of 154.6% over the calculated fair value of $ 56.61. WMT does not deserve any stars in this area.
Dividend analytical data: There are three possible stars and three key metrics in this section. A detailed description can be found on page 2 of the linked PDF:
1. Free cash flow payout
2. Debt to total capital
3. Key Metrics
4. Dividend Growth Rate
5th years Div. growth
6. Rolling 4 year old Div. > 15%
WMT has earned two stars for 1.) and 2.) above in this section. A star was earned because the free cash flow payout ratio was less than 60% and there were no negative free cash flows in the last 10 years. The stock earned a star because its recent debt to total capital was less than 45%. The company has paid a cash dividend to shareholders every year since 1973 and has increased its dividend payments for 46 consecutive years.
Dividend Income vs. MMA: Why would you take the equity risk and invest in a dividend stock when you could get a better return on a much less risky money market account (MMA) or a government bond? This section compares that stock’s earning power to a High performance MMA. There are two points covered in this section. A detailed description can be found on page 2 of the linked PDF:
1. NPV MMA Diff.
2. years to> MMA
The negative NPV MMA Diff. means that on a dividend basis, the dividend income from an investment in WMT would be less than a similar amount invested in MMA earning a 20 year average rate of 2.74%. If WMT increases its dividend to 1.9% per year, it will never match an MMA that gives an estimated 20-year average rate of 2.74%.
Peers: The company’s peer group includes: Costco Wholesale Corporation (COSTS) with a yield of 0.8%, Target Corp. (TGT) with a yield of 1.4% and PriceSmart Inc. (PSMT) with a yield of 0.8%.
Conclusion: WMT did not deserve any stars in the fair value category, earned two stars in the dividend analytical data category and no stars for a total of two stars in the dividend income vs. MMA category. This means that WMT is quantitatively referred to as 2 star weak Camp.
With my D4L-PreScreen.xls Model, I decided that the stock price would have to fall to $ 57.03 before WMT’s NPV MMA differential rose to the minimum of $ 500 that I’m looking for on a stock with 46 years of consecutive dividend increases. At that price, the stock would generate a return of 3.8%.
Resetting the D4L-PreScreen.xls The dividend growth rate model and solution required to generate the targeted MMA differential of $ 500. The calculated rate is 11.0%. This dividend growth rate is higher than the 1.9% used in this analysis, so there is no margin of safety. WMT has one Risk assessment of 1.50, which it classifies as a low risk stock.
WMT has a dominant position in most of the markets in which it competes. The enormous size, the geographical diversity and the variety of products of WMT, the aggressive cost savings and the strong international presence as well as the increased marketing of its core value message should lead to better results in the long term. Going forward, WMT will face stiff competition from Costco, Amazon, dollar stores, and other such retailers. The stock trades at a significant premium at its calculated fair value of $ 56.61. Until that changes, I will not expand my position.
Disclaimer: The material presented here is for informational purposes only. The above quantitative stock analysis, including the star rating, is mechanically calculated and based on historical information. The analysis assumes that the share will develop in the future as it has in the past. In general, this is never true. Before buying or selling stocks they should do your own research and arrive at your own conclusion. Please see my disclaimer for more information.
Full disclosure: At the time of this writing, I was long in WMT (1.4% of my dividend growth portfolio). Show a list of all my dividend growth portfolio holdings Here.
On the subject of matching items:
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