While there is no shortage of terrible publicly traded companies in the retail sector, such as Sears, RadioShack and J.C. Penney, there are three reasons why Wal-Mart WMT is a terrific long-term investment, even though its recent earnings have it down.
Wal-Mart is the biggest and the best at what it does.
There is not another retailer that operates as efficiently and as effectively as Wal-Mart does on the scale that it does. That alone is a formidable economic moat, which protects a business from the forces of time and competition. In that regard, Wal-Mart is much like ExxonMobil and Coca-Cola. Not surprisingly, legendary investor Warren Buffett, the biggest and the best at what he does, is a major shareholder of Coca-Cola, ExxonMobil, and Wal-Mart.
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Wal-Mart pays it shareholders to be long-term owners.
The shareholders of Wal-Mat historically get a raise every year to own the stock. How is that? Wal-Mart is a "Dividend Aristocrat." To achieve that status, a company must have increased its dividend annually for at least 25 consecutive years. The longer Wal-Mart stock is owned, the larger the amount of the dividend grows for the shareholder.
Wal-Mart's beta, gross margin and return-on-equity are superior, which are bullish indicators.
Combined, that makes for a positive outlook for Wal-Mart's stock. Studies by Russell Investments have shown that companies with low betas have higher returns. That was detailed in a previous article on Benzinga. The robust gross margin of Wal-Mart results in the company having the resources to constantly improve. The high return-on-equity brings to the shareholders more on all that is owned.
With the rising dividend yield, shareholders of Wal-Mart should enjoy a rewarding total return.
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