Please ensure Javascript is enabled for purposes of website accessibility

Why Walmart Is a Perfect Retiree Stock to Own Right Now

By Jeremy Bowman - Mar 29, 2020 at 3:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The retail giant is well-suited to the current moment.

The coronavirus crisis has turned ordinary business and daily life upside-down in the U.S.

Millions of Americans who would normally go to offices for work are staying home. Schools across the country are closed, and many Americans are under stay-at-home orders, kept inside almost all hours of the day.

Normal shopping patterns have been disrupted as stores and restaurants have closed, but the pandemic has also sparked a run on food and essentials like cleaning supplies and toilet paper, as Americans have stocked up on such products for what many believe will be weeks of hunkering down inside their homes. As the country's largest grocer, Walmart (WMT 0.96%) figures to be a big winner from this trend. Rival Target recently gave an example of how shopping habits have changed, saying that comparable sales in food and beverage have jumped more than 50% through March, while comparable sales of apparel and accessories were down more than 20%.  

Walmart, which derives more than 50% of its sales from groceries, will benefit more from this trend than Target, and unlike stand-alone grocers, the retail giant can also capitalize on consumers looking to pick up items like electronics, tools, or home office needs. 

In a normal business environment, Walmart would be a strong candidate for any retiree's portfolio, but with the current uncertainty around the coronavirus, the company's strengths truly shine.

A Walmart truck moving down the highway

Image source: Walmart.

Recession-proof and coronavirus-proof

Though Walmart has yet to reveal specific numbers on its business in recent weeks, there are clear signs that the company has been busy with an uptick in demand from the crisis. Earlier this week, the company said it was hiring 150,000 employees, including full-time, part-time, and temporary positions.  It's also offering special bonuses to employees during the crisis for their hard work and dedication,  and is closing some stores early in order to allow for more time to restock essential items and for employees to clean the stores. 

No one knows exactly how long the crisis will last, but Walmart should continue to see strong sales for the duration, as Americans rely on grocery stores for nearly all their meals now and look to stores like Walmart for its value and wide range of products. 

But what also makes Walmart rock-solid during these uncertain times is that the company is especially durable in a recession. It's made its reputation on everyday low prices, and has the economies of scale to help ensure them. Though we don't know exactly where the economy is headed, forecasters expect GDP to plunge in the second quarter, and Federal Reserve Chairman Jerome Powell said that we may already be in a recession. As consumers avoid spending on discretionary items and focus on low-priced necessities, Walmart will continue to deliver. At the height of financial crisis, during the fiscal year that ended in January 2009, Walmart still generated a 3.5% increase in U.S. same-store sales.  

Both the coronavirus and the recession should allow the company to gain market share and eliminate competitors, especially those that have been forced to close stores.

A reliable dividend

Not only is Walmart a rock-solid business in times like these, but the company is one of the most reliable dividend stocks on the market. It's a Dividend Aristocrat, meaning it has paid increasing dividends every year for at least 25 years. In Walmart's case, it's raised its dividend 47 years in a row.  

Today, the company offers a dividend yield of 2%. Recent increases have been modest as the company has invested in grocery pickup expansion and other e-commerce initiatives, but investors can count on the quarterly payout to keep coming as Walmart has a conservative payout ratio of less than 50%.

Put it all together, and Walmart looks like the perfect defensive stock for the current environment. The retailer should be able to outperform competitors and the stock market during both the health crisis and the expected recession that will follow, grabbing market share along the way, and delivering reliable returns for investors.

Jeremy Bowman owns shares of Target. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$129.82 (0.96%) $1.24
Target Corporation Stock Quote
Target Corporation
TGT
$169.60 (-0.04%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.