Walmart (WMT 0.79%) won't report earnings until just before the market opens on Feb. 20. But the retail giant just made a splash with two press releases.

The first release, announced on Jan. 30, declares a 3-for-1 stock split, the company's first since 1999. The second announcement, which came on Jan. 31, details the addition of more stores and the remodeling of existing ones.

Let's dive into these two announcements, and what happened the last time Walmart split its stock. Let's also look at whether the dividend stock is worth buying before it issues the split on Feb. 22 (which takes effect on Feb. 23).

Two people selecting teapots and cups from a store shelf.

Image source: Getty Images.

Performance since the last split

On April 19, 1999, Walmart issued its 11th 2-for-1 split in company history. The stock traded at a post-split price of $44.88. Between April 19 and the end of 1999, Walmart stock surged over 54%. But like the rest of the market, it was hit by the dot-com bust, and then years later, the financial crisis.

Overall, it's been a solid period for Walmart. It has been a reliable dividend-paying company that has kept pace with the broader market. Between April 19, 1999, and Feb. 1, 2024, Walmart performed nearly identically to the S&P 500.

WMT Chart

WMT data by YCharts

In comparison, the Consumer Staples Select Sector SPDR Fund, which has tracked the performance of the consumer staples sector since Dec. 16, 1998, has underperformed the market and Walmart during that time frame. Overall, Walmart has been a steady performer and an outperformer relative to its sector.

Where Walmart stands today

Walmart has done a decent job of growing its top line and maintaining an acceptable margin despite many challenges. The COVID-19 pandemic, supply chain bottlenecks, and inflation all threw a wrench into the forecasting abilities of retailers. Walmart arguably did better than peers like Target at navigating these challenges.

WMT Revenue (TTM) Chart

WMT Revenue (TTM) data by YCharts

As you can see in the chart, Walmart has been able to grow sales steadily, and its margin improved in the second half of 2023.

Reinvesting in the business

The key for Walmart going forward is to improve margins so it isn't so reliant on top-line growth. Walmart has been aware of this for a while. In April 2023, Walmart announced a five-year plan centered around automation at fulfillment centers and facilities. The Jan. 31 announcement by John Furner, the president and CEO of Walmart U.S., builds upon that theme. Over the next five years, Walmart will build or convert more than 150 stores in a modernization effort. Over the next 12 months, it also plans to remodel 650 stores across the U.S. and Puerto Rico.

The stores will be remodeled under Walmart's Store of the Future concept. The concept is more sustainability-focused, with lower energy usage per store and electric vehicle charging. The stores tout better layouts, a wider product selection, and new technology.

The cost isn't cheap. On Oct. 30, 2023, Walmart announced the grand reopening of 117 remodeled stores across 30 U.S. states, which cost over $500 million. At the time, the company said it had invested $9 billion over the last two years to upgrade more than 1,400 stores.

The key takeaway here is that Walmart has invested in its long-term growth at the expense of its short-term profitability and margins. Zoom out, and the company's top- and bottom-line growth over the last five to 10 years isn't impressive. But once you factor in the reinvestment, then the weak short-term performance is easier to tolerate.

Walmart is far from cheap

As expected, Walmart's valuation is expensive, given its low earnings growth in recent years. Walmart stock is now just a few percentage points away from notching a fresh all-time high. The price-to-earnings (P/E) ratio has ballooned to 27.4 -- which is above the S&P 500 P/E ratio of 26.3. But surprisingly, it's not that high relative to Walmart's median P/E.

WMT PE Ratio Chart

WMT PE Ratio data by YCharts

You may be wondering why a slow-growing company deserves to trade above the market average. It's likely because of Walmart's industry leadership, reinvestment in the business, and ability to perform well during recessions.

Walmart is also a Dividend King with over 50 consecutive years of dividend raises. The yield is only 1.4%, which is far from remarkable. However, the dividend does reinforce Walmart's reputation that it is going to deliver for its shareholders no matter what.

Add Walmart to your watchlist

Walmart is a very well-run business. But the stock is expensive, the growth has slowed, and the margins are relatively low. Walmart is worth putting on your watchlist or maybe buying a small position in. But it's not a screaming buy. That being said, its long-term investments have yet to pay off.

I'm excited to see what kind of effect the store improvements have on margins. If Walmart can show that it is integrating automation, sustainability, and improved margins to drive its bottom line, the stock will look more attractive.

The stock split will lower the entry point to buy a full share of Walmart. But I don't think there's any rush to pile into Walmart stock ahead of the split.