Over the past few weeks I've been working my way through the nine dividend aristocrats on the Dow Jones Industrial Average (DJINDICES:^DJI), and this week we'll look at Wal-Mart (NYSE:WMT). The company's consecutive dividend streak started back in 1975, and the current payout is $1.88. That gives it a yield of 2.4% -- enough to rank Wal-Mart among the 18 highest-yielding Dow components, but still slightly below the Dow's average yield of 2.68%.
Let's look at how the king of retail got to this point.
Wal-Mart paid its first quarterly dividend on March 13, 1974. Adjusted for splits, that payout now amounts to $0.0001. The following year, the payout got cut to a split-adjusted $0.00006. But since then, the dividend has only gone up, and it now sits at a whopping $0.47 per share. That's an increase of 783,233% over the past 38 years! Just since 1985, it's up more than 27,000%. Take a look.
That's mind-boggling. But how has the share price held up over those 38 years? If the stock has declined in value, all the dividend increases in the world won't matter much.
Well, prepare to have your mind blown again. On Jan. 2, 1975, the stock traded at a split-adjusted $0.02. On Nov. 27 of this year, it closed at $80.93. On an unadjusted basis -- meaning dividends weren't reinvested over the past 38 years -- that's a 404,550% return, or an annualized 23.8%. Reinvest the dividends, and the return over the same period jumps to 809,200%, or an annualized return of 26%.
That performance absolutely stomps on the S&P 500's impressive return of 2,473.3%, or an annualized 8.7% return, over the same 38-year period.
Even more impressive, if you purchased shares of Wal-Mart back on Jan. 2, 1975 for $0.02, when the stock was paying a quarterly dividend of $0.00006, and you still held those shares today, even though Wal-Mart is only the Dow's 18th highest yielding stock, your personal real yield would currently be 9,400%, not the 2.4% investors buying the stock today are getting.
No matter how you look at it, Wal-Mart has been an absolutely amazing investment for those who bought shares and held on for the long run.
Of course, knowing how great of an investment Wal-Mart has been in the past doesn't really help investors who may be thinking about buying shares today. So what's the future look like for the company? Well, consider that Wal-Mart was able to take the entire retail Main Street experience -- hardware store, sporting-goods shop, clothier, bakery, grocer -- and put them under one roof. It changed the way we shop. It made shopping cheaper and more convenient. Buying in bulk from suppliers meant Wal-Mart got discounts it could pass along to consumers. Building more locations and larger stores helped reduce costs even further, as more products and higher volumes moved through each location. In short, the synergies from one-stop shopping lowered operating costs.
How does that help in the future? Because taking those same principles that have worked so well in the U.S. and applying them around the world will allow Wal-Mart and its shareholders to continue to experience massive returns for years to come. For example, in India, the world's second most populated country, Wal-Mart has hardly even scratched the surface. Locations in Africa, the Middle East, and Asia, as well as further development in South America, still present big opportunities for the company. While each region of the world will certainly bring its own challenges, Wal-Mart's basic concept of a convenient one-stop shop with the cheapest prices is a formula for success no matter what country you're in.
However, as I've mentioned before with Wal-Mart, this company isn't likely to be quite as much of a highflier in the coming years. Wal-Mart is a mature and stable company, and investors shouldn't expect the kind of massive returns the stock has yielded over the past 38 years. Growth will still come -- just not at the rate it came in the past.
Fool contributor Matt Thalman has no position in any stocks mentioned. Check back Monday through Friday as Matt explains what caused the big winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter: @mthalman5513.
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