The Amazon Disruption - Sell Wal-Mart And Target As Soon As You Can

Nov. 16, 2016 1:46 PM ETAmazon.com, Inc. (AMZN), WMT, TGT184 Comments
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The Dividend Guy
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Summary

  • Growth perspectives are very limited in the brick & mortar business model. The future of store goods is through e-commerce.
  • Both Wal-Mart & Target own hundreds of big stores with expensive leases. Amazon has been built from the very beginning with the new economy in mind.
  • While both Wal-Mart & Target are investing massively in their e-commerce platforms, they are decades away from Amazon’s efficiency.

Not so long ago, I've made the decision to sell Wal-Mart (NYSE:WMT) in my portfolio. As my focus is toward dividend growth investing, it was a difficult decision to abandon such an iconic dividend payer like Wal-Mart. When you look at their past 10 years, management has been kind to shareholders without jeopardizing the health of the company:

While the dividend payment has been increasing for 41 consecutive years and both cash payout and payout ratios are very low, there is something wrong with this dividend aristocrat.

When I purchase shares of a company, I based my analysis on the 7 dividend investing principles. These principles have been elaborated based on academic studies and provide a strong guideline as not only to which company to buy, but at what price and when it is the right time to sell them. I systematically follow each of my holdings and make sure they continue to meet the 7 investing principles.

Most importantly, I review my investment thesis year after year to make sure management is following the path to growth. Because if there isn't growth, sooner or later, the dividend payment will pale. Speaking of which, the lack of growth factors for Wal-Mart is probably its biggest weakness at the moment. While looking at the whole industry and digging deeper into Wal-Mart's weakness, I realize that Target (NYSE:TGT) is in the same boat.

Sell Both Wal-Mart & Target

Don't get me wrong, I'm not telling you that either WMT or TGT is about to go bankrupt. In fact, both companies show proven business models that have been successful for decades. While both companies evolve in the consumer staple market, it's important to notice that Target is not focusing on food but rather a better in-store customer experience than Wal-Mart. Their strategies are slightly different, but my point is that

This article was written by

The Dividend Guy profile picture
31.24K Followers
My name is Mike and I’m the author of The Dividend Guy Blog & The Dividend Monk along with the owner and portfolio manager here at Dividend Stocks Rock (DSR). I earned my bachelor degree in finance-marketing, own a CFP title along with an MBA in financial services. Besides being a passionate investor, I’m also happily married with three beautiful children. I started my online venture to educate people about investing and to be able to spend more time with my family. I started my career in the financial industry back in 2003. I earned several promotions along with a good pile of diplomas. I had lots of fun working with clients in private banking for half a decade, but thought I could do more with my life. In 2016, I decided to take a leap of faith and left everything behind to travel across North America and Central America with my family. We drove through nine countries and stayed three months in Costa Rica before returning home. This was an eye-opening adventure that led me in 2017 to quit my job in the financial industry and pursue my dream; helping others with their personal finance through my investing websites. You just found the reason why I quit my suit & tie job!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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