The narrative of retail’s demise has been exaggerated. While some gimmicky, outdated stores with no competitive edge, like GameStop Corp. (NYSE:GME), have been barely holding on, others are not just surviving – they’re thriving.
Consider the giants like Amazon.com Inc. (NASDAQ:AMZN) with its robust e-commerce platform, or Costco Wholesale Corp. (NASDAQ:COST) known for its fiercely loyal membership base.
However, neither of these retail powerhouses holds my top spot. Instead, I prefer the ubiquitous, long-lived, and ever-present Walmart Inc. (NYSE: WMT). Here’s why I believe Walmart is the ultimate retail stock to invest $1,000 in right now.
It’s family-owned
The fact that Walmart is largely family-owned carries significant implications for investors. Currently, about 47% of the company is held by the Walton family – approximately 37% through Walton Enterprises and another 10% through the Walton Family Holding Trust.
When a company is family-owned, especially one as large as Walmart, the controlling family often ensures that their interests align closely with the company’s long-term success.
For shareholders, this can be advantageous. The reasoning is simple: the rich generally look out for their interests, and by aligning yourself as a shareholder, you’re effectively positioning yourself alongside them.
In the broader corporate landscape, entities like Vanguard and BlackRock might try to impose their agendas through proxy voting and influence on board decisions.
In contrast, with a family-owned firm like Walmart, where a significant portion of voting power is with the descendants of the founder, there’s a clear, consistent direction influenced heavily by the family’s values and vision for the future.
They have strong fundamentals
Like most of the retail industry, Walmart may not boast the highest margins – currently, it has an operating margin of 4.2% and a profit margin of 2.4%.
However, it’s highly efficient evidenced by its impressive 18.6% ROE. Simply put, this indicates that Walmart is highly effective at using the money shareholders have invested to generate profits, reflecting strong management efficiency and profitability relative to the equity.
Despite the slim margins common in the retail industry, Walmart’s overall financial performance and growth remains robust. The company reported total revenues of $172.1 billion in Q4 2024, marking a 4.9% increase.
More impressively, its operating income for the same period rose to $7.3 billion, a gain of 13.2%. This growth in income highlights Walmart’s ability to effectively manage costs and improve operational efficiency.
Additionally, Walmart stands out as a free cash flow powerhouse, having generated $15.1 billion in the fourth quarter of 2024 alone. This substantial cash generation capability has enabled Walmart to secure a spot on the list of 2024’s dividend kings, an accolade awarded to companies with over 50 consecutive years of dividend growth.
Recently, Walmart announced a dividend of $0.207 per share, although it went ex-dividend on May 9th, meaning it’s now too late to buy shares and receive this latest dividend payment. Nonetheless, I believe the company’s consistent performance and dividend growth remain attractive for future investors.
