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Dividend Aristocrats In Focus: Walmart Inc.

Updated on April 29th, 2024 by Bob Ciura

The Dividend Aristocrats are a select group of 68 companies in the S&P 500 Index, with 25+ consecutive years of dividend increases. We believe the Dividend Aristocrats are among the best dividend stocks to buy-and-hold for the long term.

Retail heavyweight Walmart Inc. (WMT) is one of the better-known Dividend Aristocrats. It is widely recognized, not just for its strong brand and industry dominance, but also for its long dividend history.

You can see a full downloadable spreadsheet of all 68 Dividend Aristocrats, along with several important financial metrics such as price-to-earnings ratios and dividend yields, by clicking on the link below:


Disclaimer: Sure Dividend is not affiliated with S&P Global in any way. S&P Global owns and maintains The Dividend Aristocrats Index. The information in this article and downloadable spreadsheet is based on Sure Dividend’s own review, summary, and analysis of the S&P 500 Dividend Aristocrats ETF (NOBL) and other sources, and is meant to help individual investors better understand this ETF and the index upon which it is based. None of the information in this article or spreadsheet is official data from S&P Global. Consult S&P Global for official information.

Walmart’s first dividend was paid in 1974. Walmart has increased its dividend for 51 consecutive years, which also makes it a Dividend King.

Walmart has had a resurgence of growth in the past few years by adapting to the changing climate for retailers. It has invested heavily in its e-commerce platform, and has proven it is one of the best-equipped to compete with Amazon.

Business Overview

The first Walmart store opened in 1962 in Rogers, Arkansas. It was founded by Sam Walton, who started the business with a simple vision: to offer the lowest prices. This philosophy led to Walmart’s huge growth over the years.

Walmart went public in 1972. At that time, it had 51 stores, and annual sales of $78 million.

Today, Walmart generates annual sales of more than $600 billion. It operates more than 10,000 stores, that serve nearly 230 million customers worldwide each week.

Walmart has also expanded into a variety of different services, making it a true conglomerate. The Walmart U.S. segment includes retail stores in all 50 U.S. states, Washington D.C., and Puerto Rico.

It also includes Walmart’s digital business. Walmart International consists of operations in 25 countries outside of the U.S.

Lastly, Sam’s Club consists of membership-only warehouse clubs and operates in 48 states in the U.S. and in Puerto Rico.

WMT stock underwent a 3-for-1 split and began trading on a post-split basis on February 26th, 2024.

Growth Prospects

Walmart posted fourth-quarter and full-year earnings on February 20th, 2024, and results were quite strong. Revenue increased 5.7% to $173.4 billion for the fourth quarter, beating estimates by more than $4 billion.

The company noted global e-commerce sales grew 23% year-over-year, and advertising revenue increased 33%, including 22% for Walmart Connect in the US.

Adjusted earnings-per-share came to $1.80, which was 15 cents ahead of expectations.

Source: Investor Presentation

Comparable sales in the US rose 4% to top the estimate of 3.2%. Transactions were 4.3% higher, while average ticket was off 0.3%. Sam’s Club saw transaction growth of 3.6%, with ticket size falling slightly for total comparable sales growth of 3.1%.

Consolidated operating income was up 13.2% on an adjusted basis, positively impacted by currency and LIFO inventory adjustments of 2.3% and 1.0% respectively. Walmart sees revenue growth of 3% to 4% for this year.

We currently forecast Walmart to grow its earnings-per-share by 8% per year over the next five years.

Competitive Advantages & Recession Performance

Walmart’s main competitive advantage is its massive scale. Its distribution efficiencies allow Walmart to keep transportation costs low. It can pass on these savings to customers through everyday low prices.

Walmart retains its brand strength through advertising. Because of its immense financial resources, Walmart can afford to spend billions each year on advertising.

Walmart’s competitive advantage also provides the company with steady profitability. This is true, even during recessions. The company performed phenomenally well during the Great Recession.

It steadily grew earnings-per-share each year in that time.

This was a very impressive performance, in one of the worst recessions in decades. The company continued to generate strong results last year, when the U.S. economy entered recession due to the coronavirus pandemic.

Walmart’s growth indicates the company might actually benefit from recessions. As the low-cost leader in retail, Walmart conceivably sees higher traffic during economic downturns, when consumers scale down from higher-priced retailers.

Valuation & Expected Returns

Walmart shares currently trade at a price of ~$60. Using our earnings-per-share estimate of $2.35 for the current fiscal year, the stock has a price-to-earnings ratio of 25.5x. This is well above the stock’s historical valuation. The current valuation is at a 10-year high.

We currently view a P/E ratio of 23 as fair value for Walmart stock. If the valuation multiple were to revert to our fair value estimate over the next five years, the company’s total returns would decline by 2.0% per year.

Walmart shares have performed very well for an extended period. While this has rewarded shareholders with strong returns, we view Walmart stock as slightly overvalued.

Aside from changes in the P/E multiple, Walmart should also generate returns from earnings growth and dividends. A projection of expected returns is below:

Walmart stock is projected to generate a total return of 7.4% per year over the next five years.

Final Thoughts

While many retailers have struggled with adapting to the change in commerce shopping habits, Walmart has made the proper strategic investments in our view. The company’s impressive e-commerce growth is reflective of this view.

The company has performed well and the stock is currently trading at an all-time high. We find the company’s dividend track record to be impressive, even if the most recent dividend hikes were on the smaller side.

Walmart is a safe, defensive stock in times of economic hardship, but the rich valuation prevents it from being a buy today. As a result, we rate it a hold.

If you are interested in finding more high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:

The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly:

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