Walmart (NYSE:WMT) Is Increasing Its Dividend To $0.56

Walmart Inc. (NYSE:WMT) has announced that it will be increasing its dividend from last year's comparable payment on the 3rd of January to $0.56. Based on this payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.

Check out our latest analysis for Walmart

Walmart's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last dividend, Walmart is earning enough to cover the payment, but then it makes up 113% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 50.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Walmart Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from $1.59 total annually to $2.24. This implies that the company grew its distributions at a yearly rate of about 3.5% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Walmart has only grown its earnings per share at 3.9% per annum over the past five years. Growth of 3.9% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Walmart's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Walmart is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for Walmart that investors should take into consideration. Is Walmart not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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