Walmart Inc. (NYSE: WMT) recently announced its fiscal 2027 dividend, set at $0.99 per share, a modest increase from the previous year's $0.94. This marks the company's 53rd consecutive annual dividend increase, underscoring its commitment to returning capital to shareholders. However, at the current share price of $109.34, the forward yield stands at just 0.91%, a figure that places Walmart firmly in the category of a growth stock rather than an income play.
The dividend is well covered by earnings, but the payout ratio is not as low as some might think. Walmart's own guidance for fiscal 2027 adjusted earnings per share (EPS) is between $2.80 and $2.87. Dividing the annual dividend of $0.99 by this range yields a payout ratio of approximately 34.5% to 35.4%. This is a far cry from the 31% figure that has been circulating, which appears to be based on outdated or incorrectly calculated data.
Investors should also note that the dividend is paid in four quarterly installments of $0.2475 each, which rounds to $0.25 but is not exactly that amount. Three of these installments have already been paid, with the final one scheduled for January 4, 2027, with a record date of December 11, 2026.
When examining the payout ratio, it's crucial to use consistent metrics. Walmart's GAAP earnings can be significantly impacted by fluctuations in its equity investments, leading to non-operating gains or losses. For instance, in the first half of the fiscal year, diluted GAAP EPS came in at $1.46, but the adjusted forecast excludes unpredictable items. Mixing the annual dividend with a stale earnings estimate or switching between GAAP and adjusted figures without clear disclosure can lead to misleading conclusions.
Coverage is not an immediate concern for Walmart. The company generated $19.7 billion in operating cash flow and $5.5 billion in free cash flow during the first half of the fiscal year. Additionally, Walmart repurchased $5.1 billion of its stock and had $25.1 billion remaining under its buyback authorization as of July 31. These buybacks are a more flexible and significant component of the company's capital return program compared to the dividend.
The investment thesis for Walmart hinges on its ability to deliver on its adjusted EPS guidance of $2.80 to $2.87. A payout ratio of roughly 35% leaves ample room for future dividend increases, but the sub-1% yield offers little downside protection if the stock's premium valuation contracts. For shareholders, the key drivers of total return are likely to be e-commerce growth, advertising revenue, and operating margin expansion, rather than the quarterly dividend checks.
In summary, Walmart's dividend is a reliable but modest income stream, and the company's growth initiatives are what investors should focus on for long-term value creation.
