As the chart below shows, with increases in earnings-per-share expected to be far below that for Wal-Mart over the next five years, Dollar General and Family Dollar are selling at a much higher price-to-sales ratio.
The chart below also shows how undervalued Wal-Mart is as a dividend stock. At present, the average dividend yield for a member of the Standard & Poor’s 500 Index is 1.94%. Wal-Mart’s dividend yield of 2.6% is more than 25% higher. As a Dividend Aristocrat, Wal-Mart is one of only 54 stocks on the S&P 500 to increase the amount of its dividend annually for over 25 years.
Even with its current woes, the short float for Wal-Mart is only 2.19% (one of 5% is considered to be troubling for a company). There is a dividend yield of 2.6% with a history of the amount being increased as Wal-Mart is a Dividend Aristocrat. Due to its size, Wal-Mart can do much more to capitalize on retail opportunities than Dollar Tree, Dollar General, or Family Dollar. With a dividend payment that has been increased annually for more than 25 years, Wal-Mart should be a rewarding holding for long term investors.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate WAL-MART STORES INC (WMT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WMT's revenue growth has slightly outpaced the industry average of 3.4%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $5,939.00 million or 21.35% when compared to the same quarter last year. In addition, WAL-MART STORES INC has also modestly surpassed the industry average cash flow growth rate of 11.54%.
- WAL-MART STORES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WAL-MART STORES INC reported lower earnings of $4.86 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($5.15 versus $4.86).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market, WAL-MART STORES INC's return on equity exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: WMT Ratings Report