4 Popular Discount Retailer Stocks Ranked & Analyzed

Discount retailers have built strong businesses in the U.S. With a constant focus on selling products at the lowest prices possible, often in bulk, discount retailers have built a large customer base among bargain-hunting shoppers.

As a result, the four major publicly-traded discount retailers are highly profitable, with strong brands and durable competitive advantages. And, all of them pay dividends to shareholders, and grow their dividends each year.

Each stock mentioned in this article is on our list of 350 consumer staplesstocks that pay dividends to shareholders.

The rankings in this article are done in order of total returns, for the discount retail stocks found in the Sure Analysis Research Database. All four stocks pay dividends to shareholders, and thanks to their strong brands and high cash flow, can afford to raise their dividends at high rates each year.

Discount Retail Dividend Stock No. 4: Walmart Stores (WMT)

  • Expected Annual Return: 4%-5%

Walmart’s total expected rate of return is not very high, but the stock does pay a solid 2.5% dividend yield, and the company is likely to raise its dividend each year. Walmart is on the list of Dividend Aristocrats, a select group of 53 stocks in the S&P 500 Index, with 25+ consecutive years of dividend increases.

Walmart is the largest U.S. retailer, with annual sales of $485 billion. It operates over 11,000 stores, located in 28 countries around the world.

(Click on image to enlarge)

WMT Overview

Source: 2018 Financial Factbook, page 7

The U.S. segment includes retail stores in all 50 U.S. states, Washington D.C., and Puerto Rico. It also includes Walmart’s digital business. Walmart International consists of operations in approximately 27 countries outside of the U.S. Lastly, Sam’s Club consists of membership-only warehouse clubs and operates in 48 states in the U.S. and in Puerto Rico.

The past few years have required higher investment from Walmart. The retail downturn in the U.S., coupled with the rising competitive threat of e-commerce giant Amazon (AMZN), have necessitated a significant turnaround. Fortunately, Walmart was more than up to the challenge. Walmart’s earnings-per-share declined 4% in fiscal 2017, as the company accelerated its strategic growth investments, which include improved physical store performance, international growth, and e-commerce.

The good news is, these investments have provided the company with a return to growth. Last quarter, Walmart generated revenue of $122.7 billion, which rose 4.4% from the same quarter a year ago and beat analyst expectations by $2.19 billion. Adjusted earnings-per-share of $1.14 also beat expectations, by $0.01 per share. Comparable sales rose 2.3% in the U.S., while international revenue increased 12%. E-commerce sales rose 33% for the quarter, an acceleration from 23% growth in the previous quarter.

E-commerce and international growth continue to fuel Walmart’s growth. E-commerce sales reached $15 billion last fiscal year, and have continued to grow at a high rate. Walmart has made a number of acquisitions to accelerate its e-commerce growth, including the $3.3 billion purchase of Jet.com. It also has a 10% investment stake in Chinese e-commerce site JD.com.

Emerging markets are a huge growth catalyst for Wal-Mart, not only in China, but also in India.

WMT India

Source: Flipkart Presentation, page 7

Walmart acquired a 77% investment stake in India-based e-commerce giant Flipkart, for $16 billion. Flipkart’s supply chain business, eKart, serves more than 800 cities in India, and last year recorded net sales of $4.6 billion, up more than 50% from the previous year. Walmart expects to open over 250 new international stores each year in 2018 and 2019.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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