It was once said that most Americans were never more than 15 miles away from a Walmart (WMT) outlet. Back in 2012, this was certainly the case. The retailer has a massive footprint and is one of the few brick-and-mortar operations out there capable of taking on Amazon (AMZN) on its own turf: online operations.
Walmart recently took steps to improve its supply chain operations, as well as its dividend. It’s hard not to be bullish on Walmart, and so, I am.
The last 12 months for Walmart shares have been a bit of a struggle, but the overall momentum is up. March 2021 saw shares at their lowest for the year, around $128. Now, shares are around $143, below their 52-week highs but well off the lows.
The latest news should give investors a reason to take notice. Walmart recently announced it would add a new distribution center in Baytown, Texas. The center will make the Baytown campus over five million square feet total and add another 300 full-time jobs, reports note.
Additionally, Walmart is bolstering its dividend payments, boosting the payout to $0.56 per share starting April 4.
Wall Street’s Take
Turning to Wall Street, Walmart has a Moderate Buy consensus rating. That’s based on 17 Buys and seven Holds assigned in the past three months. The average Walmart price target of $163.39 implies 14.8% upside potential.
Analyst price targets range from a low of $136 per share to a high of $185 per share.
Rising Dividends but a Fading Hedge Fund/Insider Presence
Walmart’s condition in the overall market is strange right now. After almost two years of comparative stability, hedge funds—based on the TipRanks 13-F tracker—are starting to pull back from Walmart. Hedge funds cut their WMT holdings by just over 10 million shares last quarter. Interestingly, insiders also sold shares to the tune of around $1.8 billion in the last three months.
However, as noted previously, Walmart is upgrading its dividend starting off the second quarter of 2022. In fact, Walmart’s dividend history makes it clear that it regularly raises its dividend. Walmart’s dividend yield is slightly higher than the sector average, coming in at 1.57% against an average of 1.505%.
Still a Titan of Brick-and-Mortar Retail
Give Walmart credit; it has absolutely not let grass grow under its feet. Its expansion into online markets is just the start. The company brings in new products routinely, including a new string of ice cream that includes, of all things, pizza-flavored ice cream.
With all the positive moves, it’s a wonder there isn’t more of a positive sentiment around Walmart. Analysts are split on whether to Buy or Hold almost evenly. Insiders are cutting bait rather than carrying on with fishing. Hedge funds are pulling back. This is despite a rising dividend and improving overall share prices.
One thing that could be causing this schism is a concern about overall retail operations. Retail tends to run on disposable income. If some are starting to sense that disposable income may be tough to come by soon—worn away by inflation and supply chain issues—that would be a problem for Walmart.
A comparatively minimal problem, though; remember, Walmart got a serious pandemic boost by being “essential retail” back in those early days of lockdowns and closures. That status kept them open back then and also keeps them in play in recessionary conditions. People always need food, cleaning supplies, and the like. A loss of discretionary income hurts Walmart, but it doesn’t kill it.
Walmart has also made great strides in keeping its employees, which has been a problem as the Great Resignation continues. Walmart recently added its Walmart Plus service as a fringe benefit for its employees, offering access to the service at no charge.
Concluding Views
Walmart is a rapidly-improving proposition. It’s trading down around its lowest price targets, which gives it plenty of potential upside room. It raises its dividend on a fairly regular basis, which makes it an excellent prospect for income investors.
Best of all, it’s even protected itself effectively against recession, perhaps the biggest threat to any retail operation. Why analysts and insiders are comparatively down on the stock isn’t clear, but there’s certainly a case for the “Buy” side.
Leave aside the low-class “People of Walmart” image, and you’re left with a solid retail proposition that works almost as well in a boom as it does in a bust. That kind of stability makes it a stock worth considering, and that’s why I’m bullish.
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