WMT: My first investment

So, it turns out I lied. My first foray into investing wasn’t with BWLD at the height of the market in 2007. It was with Walmart and believe it or not, I didn’t know what that was. I lived in the Pacific Northwest at the time and was told it was like Fred Meyer. Which is like Walmart if you’ve never been to a Fred Meyer, just smaller. A lot smaller.

About Walmart

Walmart is the largest retail chain in the US. Their strategy is to have the lowest prices, this initiative is called Every Day Low Price (EDLP). They achieve this through economies of scale and the shear amount of product they can purchase. This makes it advantageous for a supplier to sell to Walmart, since it gets their products in front of millions of customers. They have a variety of store formats including:

  1. Super Walmarts: groceries and goods
  2. Walmart: goods with some dry foods
  3. Neighborhood Markets: grocery stores
  4. Sam’s Club: Membership stores that sell in bulk at nearly cost
  5. Walmart.com: E-Retail store

Additionally, Walmart has stores in 26 countries, which account for 30% of sales. They are continually improving and expanding stores. Walmart recently opened the 4000th US store.

An assist from Grampa

When I turned 15, my Grampa gave me $275 to invest in the company. He was a long term buy and hold dividend investor. I didn’t know anything about investing, so my Grampa had an account set up in my name and invested the money. Officially, I was now an owner of Walmart!

After a few weeks, I got my first statement! I had purchased 10.748 shares on December 30, 1996 at a price of 23.73 and paid a $20 commission. What! A twenty dollar commision was 7% of the invested money, thats one hell of a fee! Not an ideal situation, but thats what happens when you invest a small amount of money. Plus, I think that commissions where generally higher in the late 90s than they are today.

I followed the stock closely (i.e. watched the price) for a few months before I eventually got bored. I was in the midst of being a teenager and doing all that stuff. I would check the price from time to time and was pretty pleased with the overall performance(which meant it was going up). I never did any research and wouldn’t set foot in an actual Walmart for another few years.

Time marches on!

I purchased shares at a very opportune time; Walmart’s price grew rapidly through 98/99 and the stock split. I received my first dividend in March/April of 1997 for a whopping 73 cents and automatically purchased an additional .025 shares (post split). After the split in 1998, it traded in the 45-55 dollar range until late 2011. Since 2011, Walmart has been on a tear. It broke out of its prior trading range and entered a new one between 70 and 80, where it remains to this day.

Analysis of investment return

The following numbers are split adjusted. My initial purchase went from 10.748 to 21.496 after the split. I have reinvested the dividends for the last 17 years and have been paid a total of $304.50. As of June 6, 2013, I have been paid more than my initial investment. My yield on cost is currently sitting at 18.8% based on the most recent dividend increase.

Without Dividends Reinvested

Date

Price

Shares

Value

Initial Purchase December 30, 1996

11.865

21.496

$275*

Value as of Feb 22, 2014

73.12

21.496

$1571.79 (1876.29, total)

CAGR (after 17 years, 2 months)

11.2%

0%

10.7% (11.8%)

*Including the commision in the initial value causes the CAGR for “Price” and “Value” to be different.

With Dividends Reinvested

Date

Price

Shares

Value

Dividend per share

Initial Purchase December 30, 1996

11.865

21.496

$275

.026

Value as of Feb 22, 2014

73.12

27.013

1975.19

.48

CAGR (after 17 years, 2 months)

11.2%

1.3%

12.17%

18.5%

In this particular case, reinvesting dividends vs not, only resulted in a slightly different total return. This is largely due to the rapid growth in stock price and dividend payout climbing over time. See chart below.

Historical Data provided by Yahoo Finance.

For comparison,

 

Dec 30, 1996

Close Feb 22,2014

CAGR

S&P

740.74

1836.25

5.4%

WMT, no reinvest

275

1571.79

10.7%

WMT, reinvest

275

1975.19

12.17%

Over the last 17 years, Walmart has beaten the S&P 500 by a large margin, which was largely due to a quadrupling of the price in 98/99. However, had an individual purchased Walmart before 2001, they would still be ahead of the market.

Afterthoughts

WMT has turned into my best investment. I did not originally choose the stock or spend much time following it. As I started investing myself, I had some growing pains going from strategy to strategy. Growth to really high yielders and back to dividends over a 7 year period. The financial crash of 2008 (when I started investing) gave me a gut check and taught me that I needed to find a strategy that matched my temperament. The entire time I was self investing, I had already been given a lesson from Grampa in the form of Walmart.

Would I have bought Walmart back then if I was choosing a stock? Considering I didn’t know what it was, probably not. However, with the economic climate at the time and a current 32 year dividend streak, it would have been on my radar assuming I was looking for long term dividend growth stocks. Unfortunately, I would probably have invested my money in “idontmakeanymoney.com” or “goingbankrupt.com” because when you’re young, you just want to be cool.

What was your first stock investment? Why did you make it?

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4 Responses to WMT: My first investment

  1. Hi ILG,

    welcome to the group of dividend-investors!
    I wish you great investments and good luck for the future!

    Best regards from Germany!
    D-S

    • ILG says:

      Thanks D-S! It took me a while to choose the dividend strategy, but I am glad I found it!

      Happy investing!

      ILG

  2. lars says:

    HI ILG,

    my first investments have been in the dot com bubble and well, yeah, most of the money was blown. Anyway got back into the market in 2011 and made some gains in the meantime. Currently I have switched to DGI and making some small improvements with my dividend income. Unfortunately a longer vacation is planned for 2014 so monthly investing will be reduced a little bit for a couple of month this year.
    DGI is fine for me but still I am living today…

    Kind Regards and best luck,

    Lars

    • ILG says:

      Thanks Lars! I was in the same boat as you, but a decade later!

      I am investing less right now than I would like, but thats okay. Sometimes you need a break =) I try not to live too frugally, but I find that there is very little I want out there.

      Take care!