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Walmart’s commitment to low prices makes it a choice for consumers when the economy hits a rough patch.
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Consumers abandon high-end retailers and turn to Walmart when money is tight.
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Walmart is the King of Dividends, with 52 years of consecutive increases.
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10 stocks we like better than Walmart ›
When investing in a stock, you should always make your choice with the intention of holding it for a while. That’s basically what distinguishes long-term investing from day trading and market participation. Beyond long-term investing, there is the idea of investing forever, where you buy stocks that you never plan to sell, regardless of any bad streak they may go through. My forever stock is Walmart (NASDAQ:WMT).
One of the reasons I never sell Walmart stock is that it is as recession-resistant a stock as you can find on the market. That’s one of the key attributes I look for when I decide to hold a stock for a lifetime.
When money is tight and consumers need to cut their budgets, there are more obvious things that typically get cut. It is during these times that the newest smartphone is not a priority, that expensive restaurant is overlooked, and you learn to make do with the clothes you already have.
And yet, during these times, items like groceries, hygiene items (toothpaste, soap, etc.), cleaning supplies (dish soap, laundry detergent, etc.), and probably medications won’t cut it (and shouldn’t, in most cases). That’s where Walmart flourishes. It is the example of a consumer staples stock.
There are many places you can go to get those items, but Walmart has built its brand by offering some of the lowest prices on the market, if not the lowest. So not only does it sell virtually everything anyone could need, but it also sells it cheaper than almost all of its competitors.
Almost more than any retailer, Walmart benefits from the “down trade” effect. When the economy is not ideal or inflation has increased, people tend to leave high-end retailers like Aim, Amazon-owned by Whole Foods, and Macy’sand head to Walmart for a deal.
Part of Walmart’s longevity is seen in its dividend, which has been paid and increased for 52 consecutive years, making it a Dividend King (a company with at least 50 consecutive years of increases). When some dividend-paying companies hit a rough patch, they are forced to cut or completely suspend their dividends to save cash.
With Walmart, that’s not something investors have had to worry about, and it’s unlikely they will have to worry in the future. Walmart’s business has great cash flow and easily supports its dividend through the best and worst economic times.
