1 Overrated Top Dow Stock

After moving through each stock on the Dow Jones Industrial Average (INDEX: ^DJI  ) and comparing analyst expectations with those of our own CAPS community, we can safely say that Wal-Mart  (NYSE: WMT  ) seems a bit overrated today. That's not to say it's a bad company, or even a bad holding in the long run, but after taking a look at its historic and expected growth rates, it seems that a recent flight to safety and a 20%-plus increase in its share price has caused expectations to get ahead of themselves. 

What's most interesting is that the same analysts who have an outperform rating on Wal-Mart also have an average target share price that's below the current one. Wall Street sure is a crazy place. Realistically, there are better growth prospects to be had at these prices, and Austin recommends waiting for a bit of a pullback if you were thinking about adding a position in Wal-Mart today.

If there's one thing to like about the world's largest retailer, it's the company's track record of long-term dividend payments. Wal-Mart is a dividend aristocrat and has a strong reputation of rewarding committed shareholders. 

But there are actually better income opportunities on the Dow. You can read about The 3 Dow Stocks Dividend Investors Need today. The premium report is absolutely free, so just click here and get access to your copy today.

Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (10)

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  • Report this Comment On August 18, 2012, at 12:37 PM, EvanBuck wrote:

    The article doesn't really concretely state why Wal-Mart is overrated. With the new economic numbers out today about consumer confidence, it's probably safe to say that Wal-Mart has a good valuation on its stock.

  • Report this Comment On August 18, 2012, at 9:47 PM, ElCid16 wrote:

    It took 10+ years for Wal Mart to become fairly valued, then it took just 1 year for it to become overvalued, all over again. (Albeit not as overvalued as it was in late 1999).

    I'll pass on a 4.5% FCF yield and a 2.2% dividend yield.

  • Report this Comment On August 19, 2012, at 2:50 PM, Seanickson wrote:

    I think wmt is fairly valued, trading at 15x earnings. Its incredibly consistent, does well regardless of economic environment. Theyre starting to pay down their debt, theyre lowering their capex by being more selective with international growth plans. I think investors will see a 10% return from wmt

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