Today, I’ve added 34,56$ to my annual dividend income. This represents another 9,5 cents per day.
My goal is to reach a passive income of 65$ per day, 365 days per year and that will grow at a rate above inflation for the rest of my life in order to retire from the rat race.
My most recent addition to my freedom fund is Wal Mart (WMT) at 76,01$. I bought only 18 shares but this is just a beginning.
As a dividend growth investor, I seek to buy stocks of quality companies that I think will continue to grow over the next 10-20 years at least. It is hard to predict the future but Wal Mart has a wide moat, huge market shares and performs well in all market types, bear of bull.
For sure, disintermediation caused by the growth of internet is a threat to brick and mortar shopping centers. But, I think that people will always need proximity stores to get things faster than what the mailman can do. So, I’m sure Wal Mart is going to stay in the portrait for a while.
Wal Mart (WMT) is part of the select list of the Dow Jones, part of the Dividend Aristocrats of the S&P500 and definitely a blue chip stock.
For the past 41 years, Wal Mart has paid a growing dividend. Over the last ten years, Wal Mart’s dividend has been increased by 18% per year on average! Now, these are increase far above inflation!
While the past might not repeat in the future, I like looking at the past dividend growth rate. I usually use www.buyupside.com. They offer great tools for dividend growth investors. The following graph has been borrowed from one of their calculators.
Based on buyupside’s data, Wal Mart’s dividend as been increased at an annual compounded interest rate of 23,49% since 1974 for a total of 479,900%. Incredible! Also, as you can see, Wal Mart’s dividend has been increased every year like a clock.
Wal Mart’s current dividend yield is pretty low at 2,5%. But, based on Morningstar, its 5 years average is at 2,3% and S&P500 current dividend yield is at 2,3%. The current payout ratio is below 40% and sustainable. Outstanding shares are decreasing due to Wal Mart’s buyback policy.
Morningstar currently rates it 4 stars, considers it has a wide moat and that this moat is intact plus, it gives it a fair value of 80$ per share.
All in all, Wal Mart is still an expensive stock. But, it should yield me satisfactory return over the long-term while preserving my capital and increasing my dividend income.
I think it is a good addition to my portfolio at a fair price considering the quality of this business.
Do you own Wal Mart stock? What is you point of view about the future of brick and mortar stores?
Full disclosure : long WMT
Image courtesy of sippakorn/ FreeDigitalPhotos.net