Thursday, January 5, 2012

Investing account update

Some important observations for the investing account I wanted to bring up in a text only blog entry. No video due to things about to get mathy...

Walmart WMT finally got its first dividend in the Model Portfolio. It seems like I purchased it a long time ago and it had 0 DRIP shares. So whats the big payoff? $1.58 a quarter. A bit anti climactic seeing as how ERF and JNK pay more then that each month. So why bother with Walmart with its 2.5% yield when I could be loading up on JNK at 7.5% and ERF at 9.7%?

It has to do with the other half of dividend investing. The growth part.  WMT has a 10 year average of raising their dividend by over 17%. Right now it pays $0.37 per quarter. Assuming it maintains its pattern each year that will get raised. $0.43, $0.50, $0.59, $0.69, $0.81
In 5 years it will have doubled what it pays now. Inflation can be rough but will gas be $6/gallon in 5 years? Will milk cost that much? I do not see prices doubling in that time. This means we will start coming out ahead.
In 15 years when I hope to quit each WMT share today will pay $3.89.
That means my original $250 investment of 4.3373 shares will be making $16.87 a quarter. $67.43 a year.
Thats nearly 27% yield on cost. Again that is without the compounding power of DRIP shares.

Wait a minute. If dividend growth stock increases like that for decades how come we don't have blue chip stocks paying that much now? To pay a $3.89/quarter at a 2.5% yield WMT stock will need to be $622 a share. That doesnt seem possible right? It is if we add in stock splits.  Give 4 stock splits of 2:1 each and we end up with a share price of $38 paying out $0.24 dividends.

For the record I do not expect WMT to continue growing at that pace for the next 15 years.
On the other hand WMT investors 15 years ago with their $12 share price and $0.025 dividend probably didn't expect the values of today.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others. I am not a financial planner, financial advisor, accountant, or tax adviser. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.


  1. Great post, I'd like to see you have the same growth the last 15 years has seen

  2. WMT is that steady winner who over time will provide a force field around our portfolios. Great piece to your portfolio. Thanks for the insight!