This dividend company will protect your money in any situation
Some companies are more resilient than others. And that's exactly what dividend investors want. How has this company managed to reward investors even in the worst crises? And will it continue to do so?
Walmart is a legendary American retail chain founded in 1962 by Sam Waltonen. The company has grown rapidly and today operates nearly 11,000 stores worldwide under the Walmart, Sam's Club, Asda and other brands.
When it comes to dividends, Walmart is a true champion. The company started paying dividends in 1974 and has been increasing them continuously for over 45 years, so it can be said that it is indeed a very stable dividend payer. The dividend yield is about 1.4%, which is nothing dizzying, but the annual increases and consistency are attractive.
Walmart
WMTWalmart has long enjoyed a strong market position due to their enormous size and established brand, which help them compete and keep up with the rapid emergence of online shopping. The company generates steady cash from stores and is very profitable, allowing it to raise dividends regularly. The stock has been trading below its long-term averages recently, so it appears to be a fairly interesting opportunity for investors looking for a dividend stock with good stability.
Walmart has proven its ability to defy global crises and keep dividend payouts very consistent even in tough times. During the 2008-2009 global financial crisis, Walmart did experience a decline in sales, but its business model held up relatively well and the company was able to continue to increase its dividend. Between 2008 and 2010, it increased its annual dividend by a total of 18%.
Similarly, during the coronavirus crisis in 2020 and 2021, Walmart again demonstrated strong resilience. While their revenues temporarily declined due to some store closures, an increase in online sales and rising demand for basic goods helped them offset the losses. The annual dividend for the period was increased by a total of 10%.
This ability to maintain a stable dividend during global economic turmoil shows Walmart's strong business model, which is based on selling basic goods, which is more resilient to cyclical fluctuations. This makes Walmart one of the most stable dividend companies in the US. But that's not all. There are more reasons.
- They sell basic goods: even during economic downturns, people still need to buy basic food and everyday goods. This will make Walmart $WMT+1.0% more resilient than a retailer of things people consider less essential.
- Low prices: Walmart is known for its low prices, which allows it to better compete even during recessions when people are saving more. Shopping at Walmart helps you save money.
- Huge scale: Walmart operates thousands of stores around the world, giving it much more resilience than smaller chains. When the economy slows in one region, there are still other markets that are growing.
- Efficient supply chain: Walmart has strong supplier relationships with companies that provide low-cost. This allows them to keep prices low even during adverse economic conditions.
- Strong brand: Walmart has become a globally known brand among consumers over the decades. This gives them the advantage of customer loyalty even in bad times.
Does the current situation play into its hands?
The economic cycle is heading towards a recession after 15 years of loose monetary policy, and conventional wisdom for a recession would recommend owning defensive titles like Walmart. Customers turn to such companies in times of economic uncertainty when they are looking for low prices. Unlike technology companies, which are dependent on the performance of the economy, Walmart is a true safe haven in times of recession.
Walmart's evolution toward multichannel sales is going well, as shown in Q1 2023. However, management is still looking at consumer demand with caution. Even though inflation has peaked, price cuts will be challenging. This means consumer spending will remain under pressure for the rest of the year. But if we do indeed enter a recession in the second half of 2023, the value offered by Walmart will still be attractive as shoppers looking for cheap purchases turn to discount retailers like Walmart.
Disclaimer: This is by no means an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.
