Why Warren Buffett Still Believes in Wal-Mart
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Why Warren Buffett Still Believes in Wal-Mart

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Dividends and buybacks can sometimes be an investor's best friend.

Dividends and buybacks can sometimes be an investor's best friend.

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Transcript

  • 1. Why Buffett Still Believes in Wal-Mart
  • 2. Some Might Call Buffett’s Investment Mediocre
  • 3. But They’re Forgetting the Power of Dividends
  • 4. Consistent Dividends O Back in late 2005, Wal-Mart paid out $0.60 per share in dividends. O At the time, that meant Berkshire collected $12 million per year in dividends. O Fast forward to today, and Wal-Mart pays out $1.92 in dividends per year. O That means Berkshire will collect $111 million in dividends alone this year from Wal- Mart.
  • 5. Wal-Mart Has Consistently Grown It’s Dividend
  • 6. The Best Part About the Dividend? O Over the past 12 months, Wal-Mart has brought in $12 billion in free cash flow. O At the same time, it has paid out just $6.1 billion in dividends. O That means Wal-Mart is only using about half of its free cash flow to pay its dividend. O Wal-Mart’s payout, therefore, is both sustainable, and has lots of room for growth.
  • 7. But That’s Not All… O Wal-Mart has also been using its excess cash to buy back shares of the company. O This lowers the number of shares outstanding, which gives each shareholder more value. O During 2013 alone, the company bought back 89 million shares, reducing the number of shares outstanding by 3%.
  • 8. Since 2005, This Has Reduced the Number of Shares by 24%
  • 9. For More Dividend Winners… If you’re an income investor looking for some high-yielders that are off the beaten path, check out the Motley Fool’s special free report: Top Dividend Stocks for the Next Decade