Benefits of Investing in Walmart
Walmart (WMT) is a U.S.-based multinational retail corporation that operates as a chain of discount department stores and a chain of warehouse stores. As of Sep. 2021, the company has over 10,500 locations across the globe. Additionally, Walmart is one of the largest private employer in the world with over 2.2 million employees.
Walmart has made investments in its employees, such as increasing wages and offering benefits for same-sex partners. For investors, the company is an attractive investment, as it has outperformed the S&P 500 over the past few years. For investors on the fence, the following are the top four benefits of investing in Walmart in 2020.
Key Takeaways
- Walmart’s focused expansion into emerging markets provides investors some stability as they grow their international portfolio by backing a well-known company into these newer Asian markets.
- Technology investments made by Walmart allow the company to remain relevant and profitable in spite of increased competition from e-retailers.
- Reinvesting in the company as well as giving back to shareholders via increasing dividends provides a strong message regarding the health of the company.
- The expected average annual growth rate of 5.6% over the next five years coupled with a dividend history of increasing year over year since 1974 makes Walmart a smart investment.
Stability and Brand Name
With Walmart, it is pretty well-known what an investor is going to get from an operational perspective. The company is a retail juggernaut and continues to be the largest company in the world by sales.
Over the next five years, Walmart is expected to grow earnings at an average annual rate of 5.6%. Stock price aside, due to these forecasts and its past performance, Walmart remains a stable company that should be viewed as a long-term blue-chip investment.
Roughly 75% of Walmart’s store management began their careers as hourly employees with the company. This shows the company’s focus on retaining talent by investing in employee growth as well as growing the business.
Dividends and Reinvestment
For investors, Walmart has done a great job managing its increasing profit, using a smart reinvestment strategy, and giving back to shareholders. Over the last twelve months, the company has reinvested over $10 billion in capital expenditures (CAPEX), paid out over $6 billion in dividends, and bought back over $4 billion in shares.
Walmart has a track record of increasing its annual dividend every year since it started paying a dividend in 1974, and its dividend yield is roughly 1.7%. Walmart sits on almost $15 billion in cash and short-term investments, providing additional opportunities for the company to reinvest and return capital to shareholders. These are all good signs that regardless of current stock performance, Walmart should continue to grow and add value to shareholders through capital gains and dividend payments.
Focused Effort on Continuous Innovation
While the company is a retail giant, it has also done an admirable job ensuring it is not slow-moving. Walmart has made strides to introduce new technologies, such as a “scan and go” app for iOS and Android.
The scan-and-go app is designed to offer customers a more efficient way to shop, and also makes Walmart’s daily operations more efficient. Additionally, the company has been investing in e-commerce to stave off competition from the likes of Amazon and eBay. It is also testing out emerging e-commerce strategies such as pickup lockers for online orders.
Global Diversification
Over the past decade, emerging markets have achieved rapid expansion. South Asian economies have tripled their output since 2000, and East Asian economies grew output from $3.3 trillion in 2000 to $11.2 trillion in 2010. Expanding into these emerging markets not only allows a company to achieve growth but also allows for diversification against economic downturns.
Due to these factors, Walmart has made an effort to continue its expansion globally. By investing in the company, it is possible to realize increasing international revenues and profits and own stock that won’t be affected as heavily by global recessions.
