WALMART INC. $104(New York symbol WMT; Conservative Growth Dividend Payer Portfolio, Consumer sector; Shares outstanding: 2.9 billion; Market cap: $301.6 billion; Dividend yield: 2.0%; Dividend Sustainability Rating: Highest; www.walmart.com) is the world’s biggest retailer, with 11,348 outlets in 27 countries. These stores serve a total of 275 million customers each week.
The company’s 4,756 locations in the U.S. supply 65% of its overall sales. In 1991, Walmart opened its first store outside of the U.S. through a joint venture with a Mexican retailer. Its international division (24% of total sales) now operates 5,993 stores.
The remaining 11% of the company’s sales come from its Sam’s Club warehouse stores; they sell a variety of goods at wholesale prices. There are currently 599 Sam’s Club locations in the U.S.
45 years of annual dividend hikes
Walmart has increased its annual dividend rate every year since 1974. It last raised its quarterly dividend by 1.9% with the April 2019 payment. Investors receive $0.53 a share, up from $0.52. The new annual rate of $2.12 yields 2.0%.
The company’s sales fell 0.7%, from $485.7 billion in 2015 to $482.1 billion in 2016 (fiscal years end January 31). That’s mainly because the higher U.S. dollar hurt the contribution of Walmart’s international business. Sales then increased by 0.8% to $485.9 billion in 2017, by 3.0% to $500.3 billion in 2018, and by 2.8% to $514.4 billion in 2019.
Earnings fell 58.8%, from $16.2 billion in 2015 to $6.7 billion in 2019. Per-share earnings declined at a slower rate of 54.7%, from $4.99 to $2.26, on fewer shares outstanding.
The fiscal 2019 earnings included a $4.8 billion pre-tax loss on the sale of its 80% stake in Walmart Brazil. In addition, it recognized a $3.5 billion loss on its 10.8% stake in Chinese e-commerce firm JD.com (New York symbol JD).
Without unusual items, Walmart’s earnings per share rose 11.1%, to $4.91 a share in 2019 from $4.42 in 2018.
The company’s e-commerce operations continue to grow. Its U.S. e-commerce revenues grew by 40% in 2019, and it expects online revenue to rise another 35% this fiscal year.
Walmart is also adding to its international e-commerce operations. In August 2018, it acquired 77% of Flipkart Group for $16 billion. Flipkart is a leading online retailer in India, with annual sales of $4.5 billion.
British supermarket merger faces high hurdles
The company also plans to merge its Asda Group grocery operations in the U.K. with J Sainsbury plc. The new firm would be the U.K.’s largest retailer, with 2,800 stores under the Sainsbury’s, Asda and Argos banners.
Walmart would own 42% of the combined firm and receive roughly $4.0 billion in cash. However, U.K. regulators will probably block the deal.
The company’s strong balance sheet will support its online expansion. As of January 31, 2019, its long-term debt was $43.5 billion, or a moderate 14% of its market cap. It also held cash of $7.7 billion, or $2.66 a share.
Walmart will likely earn $4.75 a share in fiscal 2020, and the stock trades at a still-reasonable 21.9 times that estimate.
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