Tuesday, October 20, 2015

Weekly Purchase 7 - WMT

For this week's sharebuilder purchase, I added to my existing position in WMT. Walmart is a ‘full’ position in my portfolio, but I could not resist the ‘Rollback’ price. Buying quality companies when they are cheap is a great way to build my portfolio!

Details of Purchase

On Tuesday, I bought 17.2871 shares of Walmart (WMT).

Action
Security
Price
Quantity
Amount
Buy
WMT
$58.775
17.2871
$1016

This purchase increases my forward annual dividends by $33.88.



I've analyzed WMT before -

Please see below for an updated criteria checklist.


Criteria Checklist

WMT 10/2015
Area
Criteria
CheckList
Comment
Quality Company
Dividend Growth
>5 years
Yes
42 Years
ROE/Op Margin
Stable
Yes
Stable
Long term Avg Growth
Stable
Yes
Stable - Note
FCF over Dividends
Yes
Yes
FCF covers Dividends
M* Moat
Wide Moat
Yes
M* Wide
M* & S&P
Credit Rating
> BBB+
Yes
AA
Cash to Debt & Interest Coverage, Debt to Equity
Cash Debt >1 or Interest Coverage > 5
Yes
Cash to Debt 0.12
Interest Coverage 11.03
Debt to Equity 60.51
M* & S&P Stars
> 3 Stars for both
Yes
M* 5 Stars
S&P CapIQ 3 Stars
Payout Ratio
<60%
Yes
41%
Dividend Growth
& Yield
Dividend Yield
>3%
Yes
3.34%
Dividend Growth
>5%
Yes - but future short term growth in 2-3% range
12.90%
Chowder
>12%
Yes
16.24%
Valuation
Yield/Avg Yield
>1.1
Yes
1.32
Dividend Yield Theory Mid Point
Below Mid Point
Yes
Mid Point 73.37
Low Point 58
P/E
Below Mid Point
Yes
Median 14.69 Current 12.26
DRRM
~10%
Yes
Assuming 5.5% growth; projected return=11.08%
M* Estimate
<M* est
Yes
M* 75
S&P Estimate
< S&P cap IQ est
Yes
S&P Cap IQ 62

Data from Gurufocus, Yahoo Finance, Google Finance, M*, S&P Capital

Fair Price Calculation

I use the dividend yield theory, PE analysis and DDRM for fair price calculation. Based on these methods, I estimate the fair price to be in the 70s. Therefore, I believe WMT is trading below fair value.

I do not expect WMT to have great growth in the short term. The next dividend raise will be in the 1.5-2% range. From a long term perspective, I think WMT will be okay. It’s a cash generating machine with a large moat trading at the 10% low yield point.

That's it for now! What do you think of WMT?
D4s

6 comments:

  1. Great buy and great entrypoint! I am also looking into buying wmt at this price level. Hoping to be a fellow shareholder very soon :-D

    Take care
    Dividend Freedom

    ReplyDelete
    Replies
    1. Dividend Freedom,
      Thanks. The price is attractive indeed. For me, I am happy to lower my cost basis which is currently around 70. Now, the problem is the earnings which will be stagnant for the next few years. This means the resulting div growth will be low. Long term, I think we should be okay.
      D4s

      Delete
  2. Nice, buy. I'm still believe in WMT long term, I would be selling a put this week if I hadn't received had my WMT put exercised.

    ReplyDelete
    Replies
    1. Chimp, yes. Only long with WMT. I think the 3.3% yield will keep me going while WMT recovers.
      D4s

      Delete
  3. I like the purchase, I'm long WMT. The BlackFriday Walmart's rumor is it's offering $98 laptop. It will be a crazy Thanksgiving at WMT again this year :)

    ReplyDelete
    Replies
    1. Vivianne, thanks for your comment. Being number 1 has its advantages with pricing. That's the strength of a strong moat.
      D4s

      Delete