1. Earnings history
Wal-Mart Stores, Inc. (NYSE:WMT) has had steady growth even through the recession. When many consumers were struggling to afford groceries and other necessary products, they turned to discount retailers. Wal-Mart was there to provide consumers good value for their money.
Its largest competitor, Target Corporation (NYSE:TGT), hasn’t had the same earnings growth that Wal-Mart Stores, Inc. (NYSE:WMT) has had. The following is annual net income in millions for each fiscal year ending in January and February.
Target Corporation (NYSE:TGT) offers similar products but sells them at a higher price. It operates 1,778 stores in 49 states. It is in the process of opening 124 stores in Canada, though. This should fuel growth for the next few years. Its net profit margins may suffer, but as these stores are completed, investors will see long-term growth. Target Corporation (NYSE:TGT) plans to have these stores opened by the December shopping season. Analysts expect a 4% earnings growth next year and an impressive 21% the next.
Wal-Mart is expected to continue its impressive growth. It has 10,000 stores in 27 different countries and benefits from growth in global spending. It is currently trading at 15.04 times its earnings, but the forward earnings multiple is 13.29. Investors can expect solid earnings growth of 5%-7%.
2. Additional services
There is a common complaint of consumers that Wal-Mart Stores, Inc. (NYSE:WMT) lines are too long and there are not enough cashiers working at the checkout lines. Wal-Mart heard this complaint and is instituting new processes to help with the wait-time.
First, Wal-Mart is installing self-checkout lanes. These are common in smaller grocery chains, but Wal-Mart has been slow to adopt. It is currently testing these in select markets with plans of rolling them out company wide.
Second, Wal-Mart Stores, Inc. (NYSE:WMT) is instituting a new program where consumers can purchase goods online and pick them up in stores without having to interact with a salesperson. This increases productivity and consumer satisfaction by eliminating long lines and wasted time.
These two additional services are difficult to quantify with net income. But it shows the company is listening to its customers and finding new ways to increase productivity and speed up customer flow.
3. Dividend payout
Wal-Mart is a member of an exclusive Wall Street club for companies that have consistently increased dividends for at least 25 years. Wal-Mart’s current annual dividend is $1.88 per share. This represents a 2.5% yield. Investors who are interested in dividend income should definitely like this.
Another main competitor, Costco Wholesale Corporation (NASDAQ:COST), also pays a dividend but its yield is only 1%, or $1.1 per share.
Costco Wholesale Corporation (NASDAQ:COST) has a different strategy than Wal-Mart Stores, Inc. (NYSE:WMT). Costco sells its actual products at cost or slightly above cost while receiving the bulk of its revenue from membership fees. Earlier this year, Costco increased its membership fees 15%, driving additional income growth.
The company has also witnessed year-over-year sales growth of 7%. Both of these are positive signs for investors in Costco Wholesale Corporation (NASDAQ:COST). Costco also does a much better job of retaining employees and offering higher qualities of customer service.
Final thoughts
Finding a company that pays a high dividend, has excellent earnings growth, and potential is challenging. Wal-Mart Stores, Inc. (NYSE:WMT) certainly fits the bill. It has a strong, profitable brand and has top hedge funds as main investors. If you are looking for a great company in which to invest, Wal-Mart may be the one.
The article 3 Reasons to Consider This Big Box Retailer originally appeared on Fool.com and is written by Austin Higgins.
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