Looking into Buying Walmart Stock?
Working to secure your financial future can lead you on a fascinating journey. There are endless options out there, each with benefits and drawbacks. Investing in the stock market is one way to give yourself a financial cushion after retirement, but it requires some work to achieve stock market success. Start by educating yourself with helpful stock tips and learn how to evaluate a stock before you invest. Make a plan based on your new understanding and your budget, and you’ll be better positioned to win in the stock market.
Fundamentals of Stock Evaluation
The basic rule for starting your evaluation of a given stock is to look at the price to earnings ratio, or the P/E ratio. The simple formula divides the share price by the company’s net annual income. Next, look at the broader market P/E, and see if your potential stock pick has a higher P/E than the market. Lower than market P/E is going to be a less expensive stock, and the reverse is true for a higher than P/E stock.1 Evaluate the relative P/E ratios to the projected earnings growth for a given stock, to determine if the stock is cheap or expensive relative to its projected growth and P/E.
Keep in mind, a low price is not your only—or best—guide to choosing a stock. There are many equally important indicators that can guide you toward the right choice. Before you invest your hard-earned dollars, it pays to make use of a free educational source designed to coach you through the process.
Pros and Cons
Let’s take a closer look at Walmart stock to start thinking about pros and cons of investing in one well known company.
The Pros:
- Walmart has consistently increased its dividends for over 40 years. In some periods they have even doubled. Although the growth may not always live up to expectations, the consistent pattern indicates stability.
- Walmart’s payout ratios have followed a pretty consistent pattern as well, and they are still on the rise. In fact, they are following the same pattern as their dividends. In looking back on Walmart’s stock, you can see that payouts tend to go up, even if only slightly. You can also see that they have consistently paid out for many years.
- Walmart serves 250M customers weekly in 27 countries, and experienced 30% growth in earnings per share from FY2010 through FY2014. 2
The Cons:
- In some years, Walmart has lost ground in its payout ratio. 2
- Recently, Walmart has been challenged to maintain its profit margins, and its record of strong growth has slipped.1
Whether you choose Walmart or another brand name stock for investment, remember that when you buy a stock, you are buying a business. Examine that business just as you would if purchasing the entire thing.1 Consider whether they are innovative and producing or developing new products that will be in demand in the future. Be prepared to pay more for a business that meets a higher standard of performance than others, but know that you are likely to reap a greater dividend or payout.
To learn more about stocks and investing, and to learn how to make the most out of the money you have available for investing, contact us today at Drive Wealth Education.
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1. http://guides.wsj.com/personal-finance/investing/how-to-evaluate-a-stock/
2. http://seekingalpha.com/article/2689975-wal-mart-third-quarter-results-why-you-should-buy-this-stock
3. https://drivewealth.com/