The 10 Most Recession-Proof Dividend Aristocrats

#2 – Wal-Mart

• 2007 through 2009 total return of 19.1% (versus -15.9% for the S&P 500)
• 2007 through 2009 maximum drawdown of 26.2% (versus 55.2% for the S&P 500)

I recently wrote about how Wal-Mart Stores, Inc. (NYSE:WMT) is an ideal stock to own for the next recession. Wal-Mart is known to offer ‘every day low prices’. When times get tough, consumers look to buy their household goods for cheap.

Wal-Mart benefits from this trend, and therefore from recessions. Take a look at the company’s earnings-per-share over the Great Recession of 2007 to 2009:

• 2007 earnings-per-share of $3.16
• 2008 earnings-per-share of $3.42
• 2009 earnings-per-share of $3.66

Earnings-per-share increased 8.2% from 2007 to 2008, and 7.0% from 2008 to 2009. This solid growth came when many businesses were experiencing large losses.

Now is a unique time in Wal-Mart’s history. The company is trading at its highest dividend yield of the last decade. Now is the perfect time to enter into a position in Wal-Mart. The company’s stock currently has a 3.1% dividend yield.

Wal-Mart Stores, Inc. (NYSE:WMT) has managed to grow earnings-per-share at 7.6% a year over the last decade, while dividends have grown at a faster 13.8% a year. Wal-Mart currently has a payout ratio of just 30.2%. Despite its low payout ratio, the company will likely grow its dividend payments in line with earnings growth over the next few years as Wal-Mart is investing heavily for growth.

Wal-Mart Stores, Inc. (NYSE:WMT) is focusing on increasing its e-commerce capabilities and better incentivizing its employees through higher wages. Short-term results are mixed. On one hand, comparable store sales are increasing, but profits were down in the company’s latest quarter due to higher-than-expected employee costs, greater shrink (basically inventory theft), and lower pharmaceutical reimbursements.

Despite recent mediocre results, Wal-Mart’s long-term growth prospects remain favorable. Smaller layout Neighborhood Market stores are growing rapidly, as is e-commerce revenue. Additionally, comparable store sales are up in the United States. If we do enter into another recession, Wal-Mart will likely benefit from increased store traffic and greater sales – and earnings. Billionaires Warren Buffett and Bill Gates are the top shareholders of the stock in Insider Monkey’s database.