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Retail

Wal-Mart Dividend Squeezes Competition (WMT, SPG, COST, TGT, BJ, COST)

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By Jon C. Ogg Updated Published
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Wal-Mart Stores Inc. (NYSE: WMT) took a page from the dividend competition playbook when it raised its payout.  The stock market has not been a huge helping hand for the shares so far.  Still, we wanted to show how this affects holders and more importantly how it affects competition.

Wal-Mart is actually a very high dividend for retail.  The prior yield was roughly 2.30%.  The new yield is closer to 2.8%.  To get anything like a 3% yield in retail it requires looking at REITs with retail exposure.  Simon Property Group Inc. (NYSE: SPG) has a 3% yield but has a premium valuation along with it.  This gives the income investor perhaps a better feeling in Wal-Mart rather than the other leader.

Costco Wholesale Corp. (NASDAQ: COST) has a dividend yield of only about 1.10% versus Target Corp. (NYSE: TGT) and a dividend yield of 1.90%.

Neither BJ’s Wholesale Club Inc. (NYSE: BJ) nor Sears Holdings Corp. (NASDAQ: SHLD) pay a dividend. If BJ’s does get acquired then that won’t matter.  If the company is not able to close on a sale, then both it and Sears are going to have to consider dividend payouts.

Wal-Mart may still be a dead money stock.  Its move last week may at least pressure other competitors to increase their payouts beyond 2011 as well.  Higher dividend payouts translates to lower capital available for cap-ex and share buybacks.

JON C. OGG

Photo of Jon C. Ogg
About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.

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