Wal-Mart Among Dividend Stocks Outperforming Market

August 31, 2012 /

This has been a strange year for the stock market.

Action has been choppy for the indexes much of the year, yet the Nasdaq is up about 18% year-to-date and the S&P 500 about 12%.

Aggressive growth investors might have trouble meeting or beating those gains in these kinds of markets. Choppy action can trigger the 8% sell rule more often than is normal.

Meanwhile, dividend stocks have done rather well this year.

IBD ran a screen of stocks that offer a dividend yield of 2% or more, trade at least 400,000 shares daily, and are up more than 20% so far this year. A hefty 90 stocks made the screen.

One of them is discount kingWal-Mart Stores ( WMT ). The stock is up about 21% year to date.

In May, the stock cleared a 62.59 buy point and began a steady advance. By July 30, the stock was 20% above the entry. Since then, the stock has pulled about 4% off the high.

Wal-Mart is now testing its 50-day line. This is its first trip to the line since the stage-one breakout. Volume was generally contained on the decline, which is good. The one exception was a gap down on Aug. 16.

The company reported quarterly results Aug. 16 that topped estimates on earnings by a penny a share and beat revenue estimates by 1.3%. But full-year guidance fell short of the Street’s number.

On the weekly chart, volume on the decline looks restrained. So, if Wal-Mart can bounce off the 50-day line in strong volume, that could create a buy opportunity.

Earnings stability is the magnet for this former growth stock. The three- and five-year Stability factors are 1 and 2. The gauge runs from 0 (calm) to 99 (wild).

The Composite Rating is a respectable 88, putting it in the top eighth among stocks.

Operating cash flow per share was 53% greater than EPS in fiscal 2012 ended in January. Return on equity was 23%, the best in at least nine years.

Drawbacks include single-digit sales growth for the past five years, and EPS growth that is expected to be only 6% this year.

The dividend yield is 2.2%.

 

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