For decades, Walmart (WMT) has been a widely owned stock delivering stellar returns to investors in the form of capital appreciation and dividend payouts. The Walmart dividend has been the focus and a main component of return for shareholders for decades.
Walmart is the largest retailer in the world. The company recorded $524 billion in sales and $14.9 billion in earnings in the fiscal year ending January 31, 2020. Walmart operates three segments: Walmart U.S., which accounts for about 66% of revenue; International, which comprises 23% of sales; and membership warehouse chain Sam’s Club, which takes up the remaining 11%. Walmart has more than 11,500 retail locations and employs more than 2.2 million associates across 27 countries.1
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About 90% of the U.S. population lives within 10 miles of a Walmart, according to the company.2 Grocery accounts for 56% of sales in the U.S. market. Health and Wellness take up 11%. The remaining 33% goes to general merchandise and other categories.3
Walmart faces a diverse mix of competition. The formidable Amazon (AMZN) poses the biggest threat in the e-commerce arena. Retail competition includes Target (TGT), which offers a similar mix of grocery and general merchandise. Sam’s Club competes with membership warehouses Costco (COST) and BJ’s Wholesale Club (BJ). In the grocery space, Walmart competes with national chains Kroger (KR) and Amazon-owned Wholefoods, in addition to regional operators such as Stop & Shop in the northeast, Publix in the south, Safeway in west and Hy-Vee in the midwest.
Walmart Dividend Quick Facts
Previous Walmart dividend payout:
- Last dividend payout per share: $.54
- Last dividend payment date: Sep 8, 2020
- Last ex-dividend date: Aug 14, 2020
- Trailing Dividend Yield: 1.54%
Next Walmart dividend payout:
- Est. ex-dividend date: Dec 10, 2020
- Est. dividend payment date: Jan 4, 2021
- Est. dividend payout per share: $.54
Walmart Dividend: Business Overview
Walmart is among a handful of retailers that have managed to thrive in 2020, despite the coronavirus pandemic devastating large swathes of the U.S. economy and retail sector in particular. The company has reported back-to-back quarters of robust sales, thanks to strong positioning in grocery and e-commerce.
Its most recent numbers were delivered in August. Walmart recorded $137.7 billion in topline revenue, up 5.6% compared with the same quarter a year ago. Adjusted operating income climbed 18.6% to reach $6.6 billion. Most notable were comparable sales at U.S. stores and Sam’s Club—up 9.3% and 13.3%, respectively.4
American consumption patterns have fundamentally shifted (at least temporarily), and nowhere has this been more evident than in Walmart’s comparable sales numbers. Customers made fewer trips to Walmart U.S. stores in the quarter due to social distancing measures. But when they did visit, they bought significantly more goods. Transactions at Walmart U.S. stores fell 14%, while the average basket of purchases rose 27%. E-commerce contributed 600 basis points to the comp figure. This helped Walmart U.S. to deliver 9.3% comp growth for the quarter, making 2.8% comp growth reported a year ago seem anemic by comparison.4
While the coronavirus pandemic has boosted sales in ways you might expect—e.g. stronger sales of groceries and household cleaning items such as wipes and disinfectants—management also reported better merchandise numbers in categories such as TVs, computing, electronics, sporting goods and landscape. Families are entertaining themselves at home. They’re spending more time improving their homes and doing yard work.
Sam’s Club reported similar comparable sales figures. Its comp climbed 13.3% compared with a 1.2% uptick in the year-ago period. This would have been 17.2% were it not for the impact of reduced tobacco sales. Membership income climbed 7.8%. Sam’s Club also reported better membership counts, renewal rates and Plus member penetration.4 5
Something to note: transactions at Sam’s Club climbed 8.7% in the quarter (verus the 14% decline for Walmart U.S.), while the e-commerce contributed 190 basis points to the comp figure, inline with the year-ago period. This suggests the e-commerce proposition for Sam’s Club might not be as robust or attractive compared with Walmart U.S.
On the conference call with investors, management warned the eye-popping comp sales figures were beginning to normalize. The impact of government stimulus checks had waned toward the end of the quarter, which led comparable sales to “settle into a more normal range.” Comps at Walmart U.S stores registered 4% growth in July—still high by historical standards—though a sign consumption has returned to a more customary pattern.6
Nevertheless, the COVID-19 impact underlines two important points to be made about Walmart: (1) the world’s largest retailer remains fundamental to the U.S. economy, with an estimated 90% of the American population living within 10 miles of a Walmart (2) the company is well positioned in e-commerce with its omnichannel strategy, possessing the right mix of retail experience and infrastructure to potentially challenge the primacy of market leader Amazon. More on this below.
The Walmart success story is well known. The company’s discount origins date to 1945, when Sam Walton opened a Ben Franklin franchise in Newport, Arkansas. Walton operated variety stores until 1962, when he opened the first Wal-Mart Discount City. From there Walmart rapidly expanded into the ubiquitous, low-cost retail chain it is known today. When you think of big box retailing, you think of Walmart. The company wrote the playbook for leveraging economies of scale to win price concessions from suppliers, passing along the savings to consumers.
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There are two underpinning philosophies that have driven Walmart’s growth over the past five decades: Everyday Low Prices and Everyday Low Costs. As anyone who shops at Walmart knows, the company never has sales. EDLP, as the philosophy is known internally, ensures that customers can always trust that Walmart prices are the best available and will not fluctuate under frequent promotional activity. EDLC is a commitment to keeping costs controlled so the savings can be passed along to consumers.
Walmart has since added a third philosophy, clumsily known as Omnichannel, which lacks the same ring as Everyday Low Prices and Everyday Low Costs. In 2015, Walmart began talking about an omnichannel shopping experience that combines e-commerce with brick-and-mortar retail and puts customer convenience at its center. It’s the belief that consumers do not or will not distinguish between online and offline retail—whether you’re shopping in-store or at Walmart.com, you’re shopping at Walmart. Think of omnichannel as Everyday Customer Convenience. It defines Walmart’s growth strategy for the decades ahead as it seeks to maintain relevancy with retail consumers while fending of the challenge from Amazon.
Walmart presents this omnichannel experience to the consumer through a number of offerings eg:
- Same Day Pickup
- Same Day Delivery
- Delivery Unlimited, now rebranded as Walmart+
If you have shopped at Walmart recently, you’ve likely seen Same Day Pickup in action. Employees walk the aisles collecting orders, which are bagged and delivered curbside to the customer. Same Day Pickup is available at more than 3,200 stores.7
Same Day Delivery goes a step further by delivering groceries to your door. As of August, Walmart offers delivery from about 2,800 stores with plans to expand to more. It offers express delivery—order online and receive your purchase in just under two hours—at around 2,000 stores.8
Delivery Unlimited, now rebranded as Walmart+, is a subscription service that offers unlimited delivery for a monthly or annual fee. Delivery Unlimited covered groceries. Walmart+ goes further by including merchandise as well. Walmart+ launched in September at $12.95 per month or $98 annually, versus $119 annually for Amazon Prime.9 10
Walmart hasn’t released subscription numbers. Amazon Prime, by comparison, has more than 150 million members.11 The COVID-19 impact notwithstanding, it remains to be seen whether Walmart+ can gain traction with a customer base that reportedly numbers 265 million people. The evolution from Delivery Unlimited (free unlimited grocery delivery) to Walmart+ (grocery plus 160,000 in-store items) suggests that management sees the subscription service as a work in progress, to be continually refined based on customer data and feedback.9
At the moment, the value proposition for Walmart+ is in frequent repeat orders from a loyal customer base. “The reason that [customers] would want a membership is because of the increased levels of service that we can provide,” chief executive Douglas McMillon told investors. “[We’ll] add some things to it beyond just delivery, so that it’s really more of a membership and a relationship. Building repeat [business] is going to be an important aspect for the company to focus on. We’ll also get the benefits of data and learn how to serve customers more effectively in time as that membership grows. So, I think in a nutshell for the customer, it relates to experience.”12
It’s a strategy Amazon developed with Prime: what started as a free shipping benefit now includes a host of other perks to tie the consumer closer to Amazon, such as Prime Video, Prime Music, Prime Gaming, Prime Video, unlimited photo storage, discounts at Wholefoods etc.
Fundamentally, Walmart and Amazon are approaching the omnichannel strategy from opposite sides of the playing field—Amazon buy acquiring Whole Foods to give it a physical retail presence, and Walmart by building out e-commerce infrastructure. Walmart, of course, is better positioned when it comes to brick-and-mortar: it has about 5,000 stores in the U.S. compared to 500 Whole Foods locations.13 14 Amazon has the upperhand in e-commerce infrastructure, with its fast network of warehouses, fulfillment centers and delivery fleets. Though Walmart can point to its 40 dedicated e-commerce fulfillment centers, in addition to its retail network from which employees can pick and pack goods.
Walmart has, and will likely continue, to make mistakes along the way. It paid $3.3 billion in 2016 to buy e-commerce start-up Jet.com and subsequently wound down the business in May 2020.15 16 Walmart bought Jet.com to attract younger, affluent urban customers. It has now latched onto the new hip thing, TikTok, of which Walmart will acquire a 7.5% stake at a reported valuation of $60 billion17 (compared to $37.4 billion for Snapchat and $33.8 billion for Twitter).18 TikTok may prove to be a worthy investment, especially if the social media app raises capital through an initial public offering. But Walmart executives have yet to explain how the acquisition will dovetail with its omnichannel strategy.
The transition to omnichannel will fundamentally alter Walmart’s culture from the top down as it reorients itself for the next two to three decades. It has laid off hundreds of corporate staff in departments including store planning, logistics, planning and real estate.19 These layoffs come as Walmart boosts hiring and compensation for frontline workers. Since the beginning of the year, it has hired 500,000 employes globally and paid three bonuses.20 In September 2020, Walmart announced it would raise wages to $18 to $21 per hour for leadership roles. Managers could earn as much as $30 per hour at Supercenters.21 To carry out its omnichannel strategy, Walmart will need customer-oriented employees who exercise initiative, and it’s willing to pay Costco-like wages to find them.
The investor who buys Walmart shares today is buying into a company undergoing a dramatic shift, one that accelerated in 2020 thanks to COVID-19. While the coronavirus pandemic has resulted in millions of unemployed and billions in lost economic activity, the upshot is this tumultuous year has given Walmart a glimpse of its future. It can now point to two quarters of earnings and significantly higher comparable figures as evidence that its omni-channel strategy is working. If an investor buys Walmart shares today, it is because they find the company offers a compelling growth story, in addition to a reliable dividend payment.
Walmart Dividend Analysis
Walmart currently pays a full-year dividend of $2.16 per share for a yield of 1.58%.22 This compares to a yield of 2.15% for Kroger, 1.82% for Target and 0.82% for Costco and no dividend from Amazon.23 24 25
Walmart has raised its dividend every year since declaring its first dividend in 1974, making the company a solid Dividend Aristocrat. In a few short years Walmart will reach 50 years of consecutive dividend increases, allowing it to claim the title of Dividend King. There is little risk the company will fail to reach the milestone. Like many, Walmart raises its dividend by the minimum 4 cents annually to keep intact its track record of consistency.26
Walmart has the financial strength to meet its dividend obligations. In the first half of its 2021 fiscal year, free cash flow reached $15.4 billion, up $9.1 billion from a year ago. It has also conserved cash by suspending share buybacks, at least for now. It bought $5.7 billion in shares in the 2020 fiscal year, approximately $700 million in the first quarter of this year and none in the second quarter.4
Another sign of Walmart’s financial strength are its very strong credit ratings, which is especially advantageous should credit markets experience volatility. It had $16.9 billion in cash and cash equivalents at the end of the quarter, up significantly from $9.46 billion in the year-ago period. It’s debt-to-capital ratio was 46%.27
That said, an investor who buys Walmart isn’t likely doing so for the dividend alone. They wish to participate in the continued growth of the company. A $1,000 investment in Walmart shares five years ago would be worth $2,400 today with dividends reinvested, for a 19% annualized return. Over the same period of time, the S&P 500 logged an annualized return of 9.3% with dividends reinvested.28 Whether the company can continue to outperform the broader economy will depend on how well it executes its omnichannel strategy for growth.
Despite being a dividend aristocrat with annual dividend increases going back decades now, the current Walmart dividend yield is not overly impressive. Despite the dividend increases, the share price has zoomed in recent years putting downward pressure on the dividend yield. The following chart shows the Walmart dividend yield over time.
Investors that purchase shares today are essentially locking in approximately a 1.6% yield with the allocated cash. There are certainly better yields offered elsewhere which is why it is so important to analyze Walmart’s business and growth prospects when considering an investment (moreso than its dividend history). Should Walmart shares pull back (and thus push up its dividend yield), it would certainly make the question of whether or not today is a good time to buy a bit easier to answer.
The business of Walmart is incredibly sound and its dividend track record is stellar. The question of valuation is a worthy consideration at current levels, but even if you’re buying at a near-term high, in all likelihood, the worst case scenario for the stock would be some sideways action for a period of time. If the company continues to execute, it might continue to outperform the broader market while paying you a decent dividend.
Frequently Asked Questions
How much is Walmart’s dividend?
Walmart’s current annual dividend is $2.16 and it is paid quarterly ($.54 per quarter).
How often are dividends paid?
Dividends are typically paid quarterly by most companies. Walmart pays the dividend quarterly.
What is the ex-dividend date for Walmart?
To capture the dividend payout, an investor must own the stock prior to the ex-dividend date. Walmart’s last ex-dividend date was August 13, 2020 for the September 8, 2020 dividend payment. The next ex-dividend date will likely be around December 10, 2020 for a dividend pay date around January 4, 2021.
1 Walmart. Fiscal Year 2020 Annual Report. Pages 8-12, 29 and 55.
2 Walmart. Automation is Reshaping Work Across America.
3 Walmart. Fiscal Year 2020 Annual Report. Page 76.
4 Walmart. Second Quarter Fiscal Year 2021 Press Release. Page 2.
5 Walmart. Second Quarter Fiscal Year 2021 Management Call. Page 5.
6 Walmart. Second Quarter Fiscal Year 2021 Management Call. Page 7.
7 Walmart. Fiscal Year 2020 Annual Report. Page 7.
8 Walmart. Second Quarter Fiscal Year 2021 Management Call. Page 20.
9 Walmart. Walmart+ is Here!
10 Amazon. Amazon Prime Price Change.
12 Walmart. Second Quarter Fiscal Year 2021 Management Call. Page 10.
13 Walmart. Location Facts.
14 Wholefoods. Company Info.
15 Walmart. Walmart completes acquisition of Jet.com, Inc.
17 Deadline. Wall Street warms to TikTok deal.
18 Valuation figures for Snapchat and Twitter as of September 22, 2020.
19 Forbes. Walmart plans corporate layoffs.
20 Walmart. Second Quarter Fiscal Year 2021 Management Call. Pages 3 and 6.
21 Walmart. Investing in our associates and roles of the future.
22 Macrotrends. As of September 22, 2020. Walmart – 31 Year Dividend History.
23 Macrotrends. As of September 22, 2020. Kroger – 31 Year Dividend History.
24 Macrotrends. As of September 22, 2020. Target – 31 Year Dividend History.
25 Macrotrends. As of September 22, 2020. Costco – 31 Year Dividend History.
26 Walmart. Stock Information.
27 Walmart. Second Quarter Fiscal Year 2021 Press Release. Page 6.28 Figures as of August 2020.