August always seems to be an odd month for me and other investors. Not that anything crazy happens but the share trading volume on the exchanges tend to be lower, volatility also tends to be lower, but if there are any tidbits of any sort of news, the markets can move, one way or another.
People are too hot, too tired, and this year, maybe they are watching the Olympics. The dog days of summer are aptly named I suppose.
That being said, believe it or not, in many parts of the nation, public as well as private schools are getting ready for another year. In less than 3 weeks the kids are back to school and as investors we should seize the moment to add a retailer to our core portfolio.
While there are slews of retailers that benefit from the back to school business, the only one that stands out for us retirees is of course Wal-Mart (WMT).
In recent years, the share price has gone up in the third quarter of the year, after counting the sales and earnings from the "back to school season." In 2009, the share price went from about $47.00/share up to $54.00/share. In 2010 the share price went from about $48.00/share to $54.00/share prior to the earnings report. In 2011 it went from about $50.00/share to $59.00/share prior to reporting earnings. This year, we are seeing some all time highs, but I expect the same jump in sales and earnings this time around as well. Since Wal-Mart does not report monthly sales numbers, the best gauge is the share price obviously, and they have not disappointed.
Hopefully that will mean another pop in the share price also.
Combine that potential capital appreciation with the consistent dividend growth and we have a solid stock for our retirement portfolio.
Fast Facts And Fundamentals
Wal-Mart : Price: $74.05/share, Dividend Yield: 2.30%, ESS Rating: Bullish
- Reported quarterly revenue growth, year over year, of 8.5%
- Reported quarterly earnings growth, year over year, of 10.2%
- $456 billion in sales
- $111 billion in gross profits
- Forward PE of 13.8
- Dividend payout ratio of just 32%
- A ridiculously low BETA of .41
Wal-Mart is not simply about the math, it is also the largest retailer on the planet. The largest retailer of back to school supplies on Earth, and the "go to" destination for the tired and weary shoppers who have been overwhelmed by higher prices from gasoline to vegetables.
In this article it is duly noted that cash strapped shoppers are still shopping at Wal-Mart. It seems to always be the savings haven for the struggling economy and struggling consumers battered by higher living costs:
"Wal-Mart's numbers are considered bellwethers for the retail industry. But on the other side of the equation, when Wal-Mart sees its earnings improving, the theory goes, it's often because times are tougher for the nation's financially strapped."
The nation's poverty rate has climbed from 15.1% to almost 16% since 2010, which should tell just about everyone that "things" are still just plain lousy. Jobs are impossible to come by, the net worth of American families has fallen, and it costs more to just drive around the block.
Sounds bleak right? Wal-Mart, on the other hand thrives on these facts, as also noted in the report:
In March, Wal-Mart detailed a $2 billion plan to "reinvest" in low prices, expressly in areas such as food and consumables, to drive more traffic to its 3,868 U.S. stores."
Wal-Mart For The Retired
I am not talking about the notorious Wal-Mart "greeters" of advanced age, folks, I am talking about placing the stock firmly in our "Team Alpha" core portfolio.
Let's face it, with 4,000 stores all over the place, we can't walk 5 feet without stumbling into a Wal-Mart for just about everything under the sun. Low prices, assortment, huge inventories, and great locations makes this the only brick and mortar retailer I would suggest holding in our retirement portfolio.
Have I mentioned dividends?
Aside from a one quarter "blip" back in 2009 (back to $.16/share just for one payment, it appears) that I cannot find a documented reason for, WMT has nearly doubled their dividends in less than 4 years (from $.22/share up to it's current $.3975/share). When was the last time you doubled YOUR income in 4 years?
With a remarkable record of paying dividends and giving raises for over 38 consecutive years, as well as a super low pay out ratio, this stock is a perfect fit for any retirees portfolio.
Here is the revenue to dividend chart of Wal-Mart:
The bottom line here is that when WMT grows, they give plenty back to shareholders, and THAT is what we are looking for.
And then there is the "back to school season" to just increase revenues this year, even more.
If we buy shares now, when we do not even feel like crawling around in the humid hot muggy heat of the day, we will be ahead of the curve. Drag yourself over to the computer and consider adding Wal-Mart.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in WMT over the next 72 hours.