The Most Important Thing to Stop the Bloodletting in Wal-Mart (WMT) Stock
Down 3.4% yesterday following earnings and down 19% year-to-date given miscalculations and intense pressure from online retailers, investors in Wal-Mart (NYSE: WMT) may be wondering if the stock will ever find a bottom. However, one thing may be able to save the stock... the dividend.
In a note to clients today, Credit Suisse analyst Michael Exstein said Walmart's dividend yield should limit further downside as investors wait for possible strategic changes to its business.
Exstein noted that comparable companies like Kohl's Corp. (NYSE: KSS), J.C. Penney (NYSE: JCP) and Target (NYSE: TGT) found support in the share price once the dividend yield approached roughly 3%. Wal-Mart's current yield stands at 2.7%. The $65 price for Wal-Mart is the line in the stand where its yield would hit 3%, or about 6% more downside from here.
Meanwhile, the upside for Wal-Mart is significantly higher given emerging signs of a healthier low end consumer and more rational capital management, the analyst said. Also the company resumed repurchases of stock in the quarter, buying back $1 billion of shares, the largest in four quarters. The analyst also noted that management also hinted at more capital discipline in the future, to "optimize both customer experience and returns" while also announcing a reduction in new Neighborhood Markets openings for 2015
The firm reiterated an Outperform rating and $85 price target on Wal-Mart.
For an analyst ratings summary and ratings history on Wal-Mart click here. For more ratings news on Wal-Mart click here.
Shares of Wal-Mart closed at $69.48 yesterday.