With a stealth rally under way in its shares, now is the time to start buying them. By Chuck Carlson Wal-Mart ( WMT +1.01% ) deserves s...
By Chuck Carlson
Wal-Mart (WMT +1.01%) deserves some love. Yes, I know the stock is trading where it was 10 years ago. I know lots of people view it as the quintessential evil corporation. And I know it's hard to grow a company with revenue near half a trillion dollars.
But I also know the stock is beginning to put on one of those stealth rallies that investors ignore at their own peril. In my view, it's time to put Wal-Mart stock in your shopping cart.
The stock is near its 52-week high of $57.90, and I think these shares will eclipse that level. And investors get paid nicely while they wait for a stock breakout, as the issue yields 2.6%.
There's no denying Wal-Mart is a behemoth. The company accounts for approximately 11% of U.S. retail sales. If Wal-Mart were a country, its annual revenue would make it among the top 25 national economies in the world.
Despite its size, Wal-Mart has been able to grow profit and revenue every year for the past decade, a feat that seems to be ignored by investors who clamor for even more growth.
To be sure, Wal-Mart's U.S. same-store sales, a popular measuring stick for retailers, have declined for nine straight quarters. Still, Wal-Mart may be reversing the downward trend.
Monthly same-store sales have increased in July, August and September, so there is hope that the quarter ended in October will show a slight improvement in same-store sales.
The company has been able to offset sluggish U.S. sales by expanding overseas. International sales rose 12% in fiscal 2011.
Wal-Mart has outlets in growing economies such as Brazil and China. The company recently acquired a 51% stake in Massmart, a retailer in 14 African countries.
Wal-Mart's valuation is reasonable. The stock trades for less than 13 times the fiscal 2012 earnings estimate of $4.49 per share.
Wal-Mart has beaten the consensus estimate in each of the past three quarters, so the current fiscal-year estimate may prove conservative.
Dividend investors should take heart in the company's willingness to boost the payout at a rapid clip. Indeed, the dividend was increased roughly 21% at the beginning of this year and has more than doubled since 2006.
Wal-Mart typically boosts its dividend early in the year, so look for another double-digit increase in early 2012.
Wal-Mart fits the profile of stocks that should hold up well in this market -- large, dividend-paying stocks that are trading at reasonable valuations and have some operating momentum.
Investors should consider nibbling at current prices and use any dips to add more aggressively to positions.
Wal-Mart offers a direct-purchase plan whereby investors may make their initial investment directly from the company. Minimum initial investment is $250. Worth noting is the IRA option available in the company's plan.
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