Walmart is one of the world’s largest and most successful retailers, and You Should Invest in Walmart Stock can be a great way to diversify your portfolio. With its massive size and global reach, Walmart has a well-established track record of success and stability. If you’re considering putting some of your money into Walmart stock, here are six compelling reasons.
Walmart’s large size and market share make it difficult for competitors to gain a foothold in the industry, its share price is relatively low compared to its peers, its stock has historically outperformed the market, its dividend yield is among the highest in the retail sector, its balance sheet is strong, and its stock has outperformed the S&P 500 for the last 10 years. Investing in Walmart stock could be a great way to benefit from the company’s long-term success.
You Should Invest in Walmart Stock
1) Walmart’s Large Size and Market Share
Walmart is the world’s largest retailer with a market share of around 16%, and its closest competitor, Costco, has a market share of just 2%. Because of its massive size and market share, it’s very difficult for new competitors to gain a foothold in the industry. Walmart has a competitive advantage in the retail sector due to its established brand and network of stores.
There are many benefits to being the biggest player in the market, including economies of scale, lower sourcing costs, greater buying power with suppliers, and a wider customer base. Walmart’s large size also lends itself to a strong cash flow, which the company can use to fund dividend payments, stock buybacks, and acquisitions.
2) Low Share Price Compared to Peers
Walmart stock has performed well over the long term, but it’s currently trading at a relatively low price compared to its closest peers. With a price-to-earnings ratio of just 17, Walmart stock has a lower price than Home Depot (25), Target (25), and Costco (26). Walmart’s current price could make it an attractive investment opportunity.
Walmart’s low price could be due to a variety of factors, including the company’s sheer size, the recent market correction, or the shift in consumer spending from brick-and-mortar to ecommerce. Regardless of why Walmart’s share price is low, it could be a compelling entry point for investors.
3) Historically Outperformed Market
In addition to being large and cheap, Walmart also has a history of outperforming the market. While the S&P 500 has historically been a good long-term investment, the market has also had its share of wild ups and downs. In the last 10 years, Walmart stock has offered investors a more consistent and reliable stream of returns.
Walmart’s consistent performance over the long term has likely been due in part to the company’s focus on low prices and high-end inventory. Walmart’s low prices and high-quality goods have helped the company appeal to a wide range of consumers, resulting in consistent earnings and revenue growth.
4) High Dividend Yield in Retail Sector
The consistent revenue and earnings growth that has driven Walmart stock’s long-term success has also resulted in a high dividend yield in the retail sector. While a high dividend yield is a positive sign, it also indicates that the company has little room to increase its dividend. Walmart currently has a dividend yield of 2.5%, which is significantly higher than the S&P 500’s yield of 2.2%.
With a payout ratio of just under 50%, Walmart has the ability to increase its dividend in the future, but the company may be hesitant to do so with the retail sector in flux. Walmart’s high dividend yield could be a great source of passive income for long-term investors.
5) Strong Balance Sheet
In addition to being large, cheap, and historically outperforming the market, Walmart also has a strong balance sheet. With a current ratio of 2.5, Walmart’s balance sheet is extremely strong, indicating that the company has more than enough assets to cover its liabilities. A company’s balance sheet is an important factor to consider when evaluating an investment opportunity.
While there are many factors that can cause a company’s share price to fluctuate, a strong balance sheet is likely to remain intact. Strong balance sheets are often a sign of a financially healthy company with long-term viability.
6) Outperformed S&P 500 for 10 Years
While past performance is not indicative of future results, it is worth noting that Walmart has outperformed the S&P 500 for the last 10 years. While the S&P 500 has had its share of wild upswings and downswings, Walmart stock has been a more consistent and reliable source of returns.
The historical average yearly return of the S&P 500 is 11.888% over the last 10 years, as of end of November 2022. This assumes dividends are reinvested. Adjusted for inflation, the 10-year average return (including dividends) is 9.181%. Walmart’s consistent performance has likely been due in part to the company’s focus on low prices, high-quality inventory, and its large size and market share.
Walmart is one of the world’s largest and most successful retailers. Investors who want to diversify their portfolio and benefit from Walmart’s long-term success can consider investing in Walmart stock. Walmart has a low share price compared to its peers, a history of outperforming the market, a high dividend yield in the retail sector, a strong balance sheet, and it has outperformed the S&P 500 for the last 10 years. Walmart stock could be a great way to benefit from the company’s long-term success.