Wal-Mart Raises Dividend, Will Other Retailers Follow? (WMT, COST, TGT, JCP, M, SHLD, JWN, BBY, GPS, KSS)

When the going gets tough, the tough raise their dividends. At least that’s the way it seems with Wal-Mart Stores Inc. (NYSE: WMT), which is having trouble meeting its revenue goals in its US stores. The company has cut costs, improved its overseas sales, and now, is raising its dividend 21% in an effort to keep shareholders happy.

We’ve taken a look at a number of other dividend-paying retailers both to see how Wal-Mart stacks up and whether more dividend hikes are in the cards for the sector.

Prior to today’s announcement, Wal-Mart paid an annual dividend of $1.21, for an annual dividend yield of 2.30%. Today’s announcement boosts the annual dividend to $1.46, or a dividend yield of about 2.8%.

Costco Wholesale Corp. (NASDAQ: COST) pays an annual dividend of $0.82, for a dividend yield of 1.10%.

Target Corp. (NYSE: TGT) pays an annual dividend of $1.00, for a dividend yield of 1.90%.

J.C. Penney Co., Inc. (NYSE: JCP) pays an annual dividend of $0.80, for an annual yield of 2.30%.

Macy’s, Inc. (NYSE: M) pays an annual dividend of $0.20, for an annual dividend yield of 0.80%.

Sears Holdings Corp. (NASDAQ: SHLD) does not pay a dividend.

Nordstrom, Inc. (NYSE: JWN) pays an annual dividend of $0.92, for an annual yield of 2.10%.

Best Buy Co. Inc. (NYSE: BBY) pays an annual dividend of $0.60, for an annual yield of 1.80%.

Gap, Inc. (NYSE: GPS) pays an annual dividend of $0.45, for an annual dividend yield of 2%.

Kohl’s Corp. (NYSE: KSS) just authorized an annual dividend of $1.00, which calculates to a yield of about 1.8%.

As we noted in our story on the eight greatest dividend gains for 2011, Wal-Mart had a lot to gain from raising its dividend. Wal-Mart’s dividend yield is now 2.5-times greater than Costco’s and about 1.5-times greater than Target’s.

Over the past 24 months, Wal-Mart’s stock has gained less than 10%, compared with gains of near 80% for Costco and around 90% for Target. Wal-Mart needs to drum up interest in its shares if it wants to boost its share price, and raising dividends is a lot better than buying back more stock.

Costco recently raised its dividend, so unless it does something out of character, no more hikes will be forthcoming for another year. Target raised its dividend last summer, so it probably won’t move again until June of this year.

Wal-Mart shares are up slightly in early trading this morning.

-Paul Ausick