If you’re concerned about high tech-stock valuations, that’s perfectly understandable. You don’t have to hide out in an all-cash position, though. A simple but effective idea is to hold a share position in Walmart (NYSE:WMT). Then, every time you receive a quarterly dividend distribution, reinvest the cash in more shares of Walmart stock.
This won’t make you fabulously wealthy overnight, but you’ll be invested in a rock-solid retailer that has survived throughout the economy’s ups and downs. Besides, as we’ll discover, you can actually generate $500 every month from Walmart’s dividend payments if your account is the right size.
Walmart Appeals to High Earners and Zoomers
During times of persistent product-price inflation, even high-income earners will sometimes cut costs. Hence, Walmart is gaining traction among people you might not usually expect to shop at the discount retailer.
Deutsche Bank analyst Krisztina Katai recently reiterated her “buy” rating on Walmart stock and raised her share-price target from $71 to $77. Walmart’s management, Katai observed, “continues to see a cautious but broadly consistent consumer, with the majority of share gains coming from the high end.”
Speaking of “the high end,” a survey from YouGov, a market-research firm, found “consideration for Walmart among households earning more than $100,000 a year has risen to 54% from 50.6% last year.” Thus, it appears that when the going gets tough, some high-income earners shop at Walmart.
Furthermore, Katai reported that Gen Z and Millennials represent Walmart’s “largest growth cohort.” According to Retail Dive (presumably quoting Walmart Chief Financial Officer John David Rainey), “Over a two-year stack,” Walmart’s Generation Z memberships “grew 63% and millennials grew 14%.”
Moreover, Walmart owns discount-store chain Sam’s Club, and it looks like Zoomers are showing up there for bargains. Sam’s Club CEO Chris Nicholas noted that the company’s Gen-Z customer cohort grew by a whopping 68% over the past two years.
How to Earn $500 Per Month From Walmart Stock
Walmart could generate vast revenue from high-income earners and young consumers. This should help Walmart continue its pattern of periodically increasing its quarterly dividend payouts.
So, if you like to invest in dividend growers, consider taking a portfolio position in Walmart. Then, reinvest your dividends to leverage the compounding effect.
Walmart offers a forward annual dividend yield of 1.17%, which is decent but not excessive. Now, let’s say you wanted to generate $500 per month from dividends. To make it simple, we’re not including the effect of dividend reinvestment. This goal is achievable if you have a large enough cash position.
The math is actually pretty simple. First of all, $500 per month equates to $6,000 per year. Therefore, we can take $6,000 and divide it by Walmart’s forward annual dividend (in this case, 84 cents since it’s four quarterly payments of 21 cents each).
Next, $6,000 divided by 84 cents equals 7,143 Walmart shares. That’s what you would need to generate $500 per month in dividend distributions. In dollar terms, assuming the stock trades at around $68 per share, you would need $68 times 7,143 shares, or $485,724.
Walmart Stock: A Top Defensive Pick for Income Investors
Walmart has an excellent opportunity to capture revenue streams from high earners and younger shoppers. Hopefully, Walmart will continue to use some of its revenue and income to reward loyal shareholders with steady dividend payments.
I’ll admit that not everyone will be able to generate $500 per month from Walmart’s dividend distributions. Still, you can use a dividend-reinvestment strategy to get rich slowly with Walmart stock.
Just invest as much as you’re able to afford, and don’t overdo it. Walmart is a rock-solid company that will probably continue to hike its dividend distributions. So, feel free to buy a some Walmart shares, and get ready to collect and reinvest the quarterly cash payments.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
