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Friday, 08/01/2003

Always Retail Orientated. Always.
By Nich Sheldon
WMT - Wal-Mart

Company Description

The company Sam built has become the world's number one retailer. Diversification into grocery (Wal-Mart Supercenters and Neighborhood Markets), international operations and membership warehouse clubs (SAM'S Clubs), has created greater opportunities for growth. But unlike some corporations whose financial growth does not translate into more jobs, Wal-Mart's phenomenal growth has been an engine for making jobs. Currently, Wal-Mart employs more than 962,000 associates in the U.S. and 282,000 internationally.

[Source: Company Web Site]

Reasons to Invest:

It would seem that DRIP investors are always on the prowl for a DRIP that is low in cost, meaning that the stock is at a low premium and that it has a high potential for gaining profits in the long run. One company that seems to always meet or beat its earnings estimate is Wal-Mart (WMT). We'll DRIP investors, Wal-Mart's guarantee and slogan is, "Always low prices. Always." I think we all could agree that they do offer quality retail products for generally good prices, but wouldn't it be better if their guarantee was 'Always the best DRIP investment. Always.' Unfortunately for us long term dividend reinvestment traders, their stock does not follow this slogan. However, Thursday's (July 31st) close for WMT was 55.91, which is just shy of their 52-Week high of 58.02.

With this in mind, traders may be wondering why we would highlight a company that is so close to their long-term resistance. Before we all decide that this is just a shot in the dark, let us remind you that WMT has been consolidating around the 55 level for quite some time now, leading us to believe that a pop higher may by in WMT's future. If this was an option of the week article or a stock pick of the week article, we would not even consider playing a stock like WMT at its current state. On the other hand, DRIP's are long-term investments and the thought of WMT reaching its all time high of 70 or perhaps even higher over the course of a few years seems very feasible.

Actually, we see a break over 58 happening within the next year. Our guess is that the next resistance level over 58 would be right around the 62.50 level. Should WMT break through this resistance level, the psychological overhead resistance level of 70 would be next. Knowing what the support and resistance levels are for your intended investment is paramount. If you know what these levels are then you can generally see what the price action possibilities are for any given investment.

Another sign of future strength for Wal-Mart would be their market capitalization, which is a hefty $244.8 billion. On top of this WMT offers a bulky annual dividend of $0.36 per share. Wal-Mart just declared this quarterly dividend of $0.09 per share on July 1st, 2003. As an added incentive the company yields a 0.64% dividend to its shareholders. So basically, for those that are invested in WMT's shares, every quarter you will be paid $0.09 for every share that you own. Moreover, since we are investing for the long-term here, we could care less about current price levels of Wal-Mart when we continue to get paid for just being a player on the stock.

Furthermore, this retail giant sees a growth rate for its dividend percentage to be at 7.14 over the next year, 14.47 over the next 3 years and 17.32 over the next half-decade. Their sales estimates are expected to grow by 12.23 percent, 13.91 percent and 15.62 percent, respectively over the next 1, 3, and 5 years. Of course, these numbers are always forward looking and have nothing to do with what the stock is currently doing right now, but usually these numbers are pretty close to being actual.

As of recently, we have been covering the price performance of each of our Drip of the Week's. This DRIP of the week is no different, as over the past four weeks WMT has been shooting to the top of the retail industry. Wal-Mart is currently 72nd out of 99 companies in the industry and this is a positive sign, since just 13 weeks ago WMT was 17th out of 99. The more price performance for the stock means that more investors are readily buying, selling or exchanging shares of that stock. After all, would you rather invest in a stock that is moving sideways or invest in a stock that is constantly moving either up or down?

I could go over a thousand statistics for you, but statistics don't really mean anything to most traders, unless they are being compared to other companies, sectors, or indices that are candidates for ones portfolio. I would like to think that you DRIP investors, whether beginner or guru, would do your own research on any stock that is recommended for purchase, whether it was recommended by us or another professional advisory service, before you purchase any shares of any given stock. The research that you do would provide all those stats that you technical DRIP investors may be seeking.

What I will do is spell out Wal-Mart's financial summary, as this provides insight into what the company has been doing over the past quarter and why we like this retail superstore. WMT's revenues rose 10% over the first quarter to $57.22 billion. These numbers are a direct reflection of domestic and international expansion and a boost in same store sales. Their net income rose a striking 15% to $1.83 billion, which is a representative of WMT's improved merchandising, decrease in interest expenses and a reduction in inventory shrinkage.

One last thing to keep in mind is that Wal-Mart will announce its second quarter earnings on August 13th. They are planning to meet and/or beat estimates of 0.50.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy:      6
Buy:            13
Hold:            6
Sell:            0
Strong Sell:     0

Total:          25


DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment:  Yes

Min/Max Investment = $50 to $100,000/year


Reinvestment Fees - 
Dividend investment fees: None
Cash investment fees: $5 + 10c/Share
Auto reinvestment fees: $1 + 10/Share



Transfer Agent:
First Chicago Trust
800-438-6278


Corporate Headquarters:
702 Southwest 8th Street
Bentonville, AR 72716 
Phone: (479) 273-4000
Fax: (479) 273-4053




 
 

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