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You know that buying a stock makes you part owner of a company, theoretically with millions of other people. But, while ownership has its privileges (at minimum you get a neat stock certificate and an invitation to the annual meeting), being an owner doesn't necessarily pay. Sure, you make money if the stock goes up, but only if you sell, and you can, in theory, lose all the value of your investment if the stock tanks.
Enter the dividend. Here, you get money simply from holding the stock. Companies pay a yield, which is expressed in a percentage based on the stock's price. For example, if a stock trades at $10, and pays a 10% annual yield, your dividend payment would be a $1. (Usually, companies break out the payments quarterly, so, using our example, you¿d get, well, a quarter each quarter.)
Companies that pay dividends fall into a few categories. First, you've got your big, stable companies that generate enough cash that it makes sense to throw some back to shareholders. Next, there are businesses, like real estate investment trusts, that are in the business of sitting back and receiving cash, then distributing it to holders. And, then there are companies that need to dangle a high dividend yield like a carrot to ease investor fears. Cigarette-maker Altria has been doing this for years.
Simply because a company pays a dividend doesn't make it a good investment. After all, you may want to take a chance on a growth stock that can move higher in price than dividend payers are known to do. But, you can¿t beat the safety of knowing that, even if a stock doesn't move in a year, you¿re at least making something off your investment.
Home / Markets / Industries / Retail
Tuesday, May 13, 2008
Analysis
Stimulus Checks to Buoy Wal-Mart
Ken Sweet
FOXBusiness
![Wal-Mart Storefront [276]](/images/stories/wal_mart_storefront.jpg)
Of all the companies poised to benefit from the economic stimulus checks, Wal-Mart is expected to lead the pack.
Consumer research experts said a downturn in the economy matched with quickly escalating energy and commodity prices have pushed consumers and their checks into the arms of Wal-Mart (WMT), the largest discount retailer in the world.
“We are seeing consumers moving their purchasing habits toward necessities instead of looking to splurge their stimulus checks on a big item,” said Phillip Rist with BIGResearch. “That stands to benefit Wal-Mart and Target we believe.”
Wal-Mart plans to cater to the stimulus check crowd by offering free check cashing services for consumers’ rebates, clearly hoping to tap a portion of that money before it goes to credit cards or the gas tank.
Other retailers are taking it a step further: Sears and Kroeger will add 10% to the amount of a gift card purchased with a stimulus check.
Wal-Mart executives, meanwhile, are being cagey about the impact from the 146 million stimulus checks.
During the retail giant’s quarterly earnings call Tuesday, executives described the potential benefit of the checks as both “difficult to quantify” and “uncertain.”
The company also gave a conservative guidance for its same-store sales for the second quarter--the period economists expect those checks to be used. Wal-Mart predicted sales will be flat or up 2%. That’s below the consensus estimate by analysts.
"There are still uncertainties during the rest of the year," President and CEO Lee Scott told investors. "The economy is playing a critical factor in 2008."
One problem is that fewer people may spend those checks at Wal-Mart than originally anticipated.
According to BIGResearch, 7.6% of all consumers said they will spend their checks on gas this summer, that’s up from 5.3% when consumers were surveyed in February. Also, 47.1% of consumers said they will either use their stimulus checks to pay down bills or save it.
“I think Wal-Mart thinks that inflation and gas prices will eat away at those checks before they will really benefit from them,” said Joseph Beaulieu, a retail analyst with Morningstar.
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