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Why Falling Stock Prices Could Be Very Good for Investing in Wal-Mart Stores Inc.

June 10, 2010 | About:
Penny Sleuth

Penny Sleuth

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Today’s topic of discussion in the Penny Sleuth is none other than Wal-Mart… I know, hard to believe. But don’t be shocked that you’re about to read about one of the world’s biggest blue chips in your source for small-cap stocks – after all, shares of this retail behemoth are presenting some unique opportunities for investors this summer as long as its share prices continue to tumble.

Let me explain…

For many people, this stock market drop is scary. No one likes when stocks go down. And for the most part, neither do I. But there’s another side of the story if you’re interested in income investments…

Sure, the S&P 500 has fallen 10%. But its dividend yield has jumped 20 basis points, to 2.05%. That’s a huge jump in less than a month. We’re seeing many borderline yields — the ones too small to mess with — come back into our potential investment range.

Let’s use Wal-Mart Stores Inc (WMT) as an example. Wal-Mart is one of the safest bets on all of Wall Street. It may not go straight up, but it’s certainly safer than most retail plays. And if you could collect a reasonable dividend payment, it’d be worth holding through any market. Unfortunately, it just isn’t that large of a payer.

But as the broad market continues to decline, Wal-Mart’s relative payout is looking more and more attractive. After all, the company’s share price is an afterthought if you can cash in a respectable dividend. So as shares of Wal-Mart continue to drop (they’re already down more than 4% in the last quarter), the cash payouts collected by shareholders continue to become a larger percentage of your initial investment.

If this trend continues, we may be able to swoop in and pick up shares of Wal-Mart and lock in a dividend yield higher than it’s ever been before.

We aren’t there yet. And this isn’t necessarily a buyer’s market just yet. But as we enter a period of market stagnation, which we expect will happen in coming months, we might be able to lock in WMT with a yield approaching 3%. I’ll let you know if that time ever comes.

061010Sleuth.png

As you can see in the chart, higher dividends with lower stock prices can make all the difference. 2.4% is the highest dividend yield WMT has ever paid out – and incidentally, the stock’s price is at the highest level in history as well. Those two factors mean that any drops in Wal-Mart’s price will deliver a materially greater impact on the company’s yield.

But as attractive as Wal-Mart may be, I think that some of the ignored dividend plays on the market right now already offer impressive opportunities for the investors who know about them. That’s exactly the message I’ve been sending to my Lifetime Income Report readers lately – the difference, of course, is that I’ve already sent them my favorite ignored dividend stocks right now.

But there’s still time to take advantage – if you want the names of my favorite high-yielding stocks, learn more about [/i][i]Lifetime Income Report here…

Sincerely,

Jim Nelson

Penny Sleuth

June 10, 2010


Rating: 2.4/5 (16 votes)

Comments

the Spark
The Spark - 4 years ago
How can you possibly say that the stock's price is at its highest level in history. It is well off its high. Did you even look at your own chart??? When someone makes a material error such as this it raises serious questions about the whole thesis.
augustabound
Augustabound - 4 years ago
Unless I missed it, I didn't see a disclosure anywhere.

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