Wal-Mart Dividend Squeezes Competition (WMT, SPG, COST, TGT, BJ, COST)

Wal-Mart Stores Inc. (NYSE: WMT) took a page from the dividend competition playbook when it raised its payout.  The stock market has not been a huge helping hand for the shares so far.  Still, we wanted to show how this affects holders and more importantly how it affects competition.

Wal-Mart is actually a very high dividend for retail.  The prior yield was roughly 2.30%.  The new yield is closer to 2.8%.  To get anything like a 3% yield in retail it requires looking at REITs with retail exposure.  Simon Property Group Inc. (NYSE: SPG) has a 3% yield but has a premium valuation along with it.  This gives the income investor perhaps a better feeling in Wal-Mart rather than the other leader.

Costco Wholesale Corp. (NASDAQ: COST) has a dividend yield of only about 1.10% versus Target Corp. (NYSE: TGT) and a dividend yield of 1.90%.

Neither BJ’s Wholesale Club Inc. (NYSE: BJ) nor Sears Holdings Corp. (NASDAQ: SHLD) pay a dividend. If BJ’s does get acquired then that won’t matter.  If the company is not able to close on a sale, then both it and Sears are going to have to consider dividend payouts.

Wal-Mart may still be a dead money stock.  Its move last week may at least pressure other competitors to increase their payouts beyond 2011 as well.  Higher dividend payouts translates to lower capital available for cap-ex and share buybacks.

JON C. OGG