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Wal-Mart Joins The 'Dogs Of The Dow' For First Time Since DJIA Inclusion In 1997

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Wal-Mart Joins The 'Dogs Of The Dow' For First Time Since DJIA Inclusion In 1997

According to a Credit Suisse note by Michael Exstein, Wal-Mart Stores, Inc. (NYSE: WMT) has recently hit a significant milestone – one that it hasn't experienced in almost 20 years of being on the DJIA.

"This is the first year that Walmart has made the ‘Dogs of the Dow' list since the retailer was added to the Dow Jones Industrial Average in 1997," Exstein began.

The ‘Dogs of the Dow' is a list of Dow-component stocks used as a pick and pan strategy. In order to be among the "dogs," a stock must be one of the top 10 issues with the "highest dividend yields at the start of the year."

"The premise is simple," Exstein elaborated, "the Dow stocks with the highest dividend yields are often perceived to have a disconnect between the dividend (a proxy for management confidence and/or cash flows) and the share price."

Related Link: Wal-Mart To Enter The Gas Station Business

Success Of The Strategy

According to the Credit Suisse report, "[T]his investment strategy has yielded 7.9 percent in total returns, vs. 6.3 percent for the Dow."

The strategy works as follows: "Investing in these companies is believed by some to result in higher total returns than the Dow in the long run due to above-average dividends and potential for price appreciation as the share prices of these companies rebound or revert to the mean," the note explained.

What It Means For Wal-Mart

Exstein suggested that the inclusion of Wal-Mart on the list "could possibly be attracting the stock some incremental attention."

Exstein justified Wal-Mart's place by saying, "WMT qualifies under this investment strategy as well – it was the worst performing stock in the DJIA in 2015 with an annual total return of -27 percent, the lowest annual return the retailer has seen in decades."

However, Exstein did add this aside: "Conversely, the stock has been one of the few outperformers in January 2016, growing 8.3 percent in the month and significantly outperforming the overall DJIA which was down -5.5 percent for the month."

Exstein concluded, "While there are clearly many factors influencing this performance, perhaps the simple virtue of being a ‘Dog of the Dow' could be acting as an [sic] short term tailwind to WMT at the start of this year."

Latest Ratings for WMT

DateFirmActionFromTo
Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Raymond JamesMaintainsOutperform

View More Analyst Ratings for WMT
View the Latest Analyst Ratings

 

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