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Are you worried about deflation? Inflation? One way or the other, signs suggest that things will get plenty tough. To best position your portfolio, you need a company that can gain a competitive advantage even in the worst economic environment. That company is Wal-Mart (NYSE: WMT).

Wal-Mart fast facts

Market cap

$185.7 billion

Dividend yield


Trailing P/E



$416.7 billion

Net income

$14.8 billion

Source: Capital IQ, a division of Standard & Poor's.

Now, I'm sure you're thinking: a retailer? In this difficult economic environment? Absolutely.

Wal-Mart is especially well-suited for a deflationary environment. It sells the essential products that everyone needs, and racks up an astounding $47 million in sales every hour of every day, making it the world's largest retailer. More importantly, it's committed itself to be the low-cost leader, bar none. Its supply chain wrings costs out of the system like a python squeezing an alligator. And when economic conditions worsen, Wal-Mart gains an advantage over less capable (but still formidable) rivals such as Target (NYSE: TGT), Costco (Nasdaq: COST), and Dollar General (NYSE: DG).

Wal-Mart's prudent cash management has certainly positioned the company better financially than Dollar General, which suffers under a massive debt load acquired when it was swallowed by a private equity firm. In contrast, Wal-Mart can easily cover its interest payments -- 12 times over, in fact. And Wal-Mart absolutely dwarfs Target and Costco in revenue, selling nearly three times as much as they do combined.

Wal-Mart has buying power in spades (and other stuff, too). With $417 billion in annual sales, the Bentonville behemoth can wrest concessions from the most powerful suppliers. Even the mighty Procter & Gamble (NYSE: PG) has to cave in on pricing when Wal-Mart comes to call.

Room for growth
Wal-Mart's sales growth has recently slowed, but it does have several options for continued growth. First, it's expanding into American urban markets with smaller-format stores. Wal-Mart has traditionally focused on being the retail center in smaller cities, where cheaper and more abundant real estate can allow it to provide the one-stop shop for all consumer needs.

Second, Wal-Mart is expanding its tentacles into even more consumer areas. It's been pursuing banking operations at international locations, and it's entered into personal finance in the U.S. with its own credit card and money centers in more than 1,000 locations.

Third, Wal-Mart has robust international operations. It recently moved into India, and it has a solid presence in China as well. In its most recent quarter, the retailer reported 11% sales growth from its foreign divisions, which comprise just 25% of its total sales. Clearly, the company has plenty of room to expand its global component. Brazil, Mexico, and China were notable performers this quarter.

Time to get paid
Like McDonald's (NYSE: MCD), Wal-Mart thrives in tough climates. And also like Mickey D's, its strong operations have allowed Wal-Mart to pay and quickly increase its dividend. This attractive payout makes it particularly suited for tough times. Wal-Mart's stock currently yields 2.4%, and the company has piled on increases at the remarkable rate of 16% per year over the past five years.

The cash-cow nature of its business means that Wal-Mart can continue pumping out those checks. And it's certainly one of the reasons that superinvestor Warren Buffett's Berkshire Hathaway (NYSE: BRK-B) bought shares in the company last year. Buffett is a closet dividend investor. And the massive cash returns to investors are also why I called McDonald's a dividend play for a lifetime. Even if these companies' expansions slow down, less money goes into their capital expenditures, meaning more can go into our pockets.

If you like the prospect of continued growth, and the safe payouts offered by a blue-chip retailer, Wal-Mart looks like a retailer for all seasons.

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Jim Royal, Ph.D., owns shares in Berkshire and P&G. Berkshire Hathaway, Costco, and Wal-Mart are Motley Fool Inside Value recommendations. Berkshire and Costco are Stock Advisor picks. Procter & Gamble is an Income Investor pick. The Fool owns shares of and has Write Covered Calls on Procter & Gamble. The Fool owns shares of Berkshire and Costco. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.