Wal-Mart has high expectations for the current fiscal year, with the core U.S. business 'back on track,' chief executive officer Mike Duke said in a statement.Seth Perlman
Wal-Mart Stores Inc. raised its annual dividend by 8.9 per cent on Thursday, as momentum in the company's key U.S. chain has rebounded.
The increased payout comes as the world's largest retailer works on balancing its need to invest in expanding its business with the desire to attract shareholders who have seen Wal-Mart miss out during the broad market rally.
"Part of the reason that people own the stock is that it pays a dividend," said Consumer Edge Research analyst Faye Landes. Wal-Mart wants "to have a nice payout, but they also feel that they have other places to put their capital."
Wal-Mart said its board approved a dividend of $1.59 (U.S.) a share for fiscal 2013, which ends next January, up from $1.46 last year. That equates to paying about $5.52-billion to shareholders.
The family of founder Sam Walton stands to get about half of that payout, as it owns close to 50 per cent of Wal-Mart's outstanding shares through various entities.
Wal-Mart has been a big buyer of its shares, spending $6.3-billion on buybacks during fiscal 2012.
Wal-Mart has raised its payout every year since it first declared a dividend of 5 cents a share in 1974. The latest increase comes after a 20.7 per cent hike a year ago.
Wal-Mart has high expectations for the current fiscal year, with the core U.S. business "back on track," chief executive officer Mike Duke said in a statement.
Wal-Mart posted its second successive rise in quarterly same-store U.S. sales last week, and traffic in the stores rose for the first time after six quarterly declines.
Wal-Mart continues to invest in areas such as e-commerce, where it trails market leader Amazon.com Inc., and needs to cut costs to keep its prices low in the United States. Wal-Mart's international business is still growing and the Sam's Club warehouse chain has done well.
Wal-Mart's new dividend level is "appropriate," for the company, which has "terrific cash flow," said Raymond James analyst Budd Bugatch.
Wal-Mart's free cash flow fell to $10.7-billion last year from $10.9-billion a year earlier, as capital expenditures outpaced its growth in net cash from operating activities.
Mr. Bugatch, who recently downgraded Wal-Mart shares to "market perform," noted that the 8.9 per cent dividend increase is above the rate of earnings growth Wal-Mart forecast for the year. Wal-Mart expects earnings per share to rise about 4 to 8.4 per cent in 2013, to $4.72 to $4.92 a share.
The dividend will be paid in quarterly instalments of 39.75 cents a share, with the first payment on April 4 to shareholders of record as of March 12.