Dow component Wal-Mart (NYSE: WMT) revolutionized the department-store retail industry, creating new emphasis on low pricing and value. Over time, the stock's performance has also been strong, with solid performance and dividend yields that have provided income growth to investors over time as well. Yet one thing that investors haven't enjoyed in nearly two decades is a stock split from the big-box retail giant, and ongoing difficulties could make it tough for Wal-Mart to break that drought in 2017. Below, we'll look at Wal-Mart's stock split history and whether this year might finally bring an end to 18 years of going without a split.
Image source: Wal-Mart.
Wal-Mart stock splits in the past
Here are the dates and split ratios for the stock splits that Wal-Mart has done in the past:
Data source: Wal-Mart investor relations.
As you can see, Wal-Mart has a long history of doing stock splits at fairly regular intervals -- until 18 years ago. Since then, those splits have come to a halt.
One key element of Wal-Mart's split behavior is that the company hasn't followed some of the more typical rules in determining exactly when to do stock splits. Often, companies wait for their shares to reach triple-digit levels before splitting their shares, arguing that lower share prices are helpful for investors trying to put money to work in their stock.
Yet Wal-Mart has made splits at a wide variety of prices, ranging from a low of $23 per share for its 1975 split to nearly $90 per share with its most recent split in 1999. In fact, 1999 was the only time that Wal-Mart stock had ever topped the $100 per share mark, briefly climbing above that level before the split took place. The most common range at which Wal-Mart made splits was in the $45 to $50 per share area in the 1970s and early 1980s, and the $60 to $70 per share range in the late 1980s and early 1990s.
Why Wal-Mart stopped splitting its shares
The basic problem that Wal-Mart has faced is that its stock hasn't performed all that well since the turn of the millennium. Its overall average annual return over the past 17 years has been just 2.3%, and that includes the dividend income that investors have received along the way.
Throughout the early 2000s, the share price treaded water in the $50 to $60 range. Although the discount retailer fared quite well during the market meltdown in 2008, it nevertheless didn't participate in the rebound that ensued following the end of the financial crisis.
It wasn't until early 2015 that Wal-Mart stock reached $90 per share. That had followed several years of sluggish sales performance, but once Wal-Mart stemmed the tide of same-store sales declines and started gaining ground again, some investors concluded that the company's fundamental long-term strength would finally shine through. Since then, however, Wal-Mart has fallen by as much as a third from those levels, and even now, it remains well below those previous highs from two years ago.
Will Wal-Mart make a split in 2017?
Looking forward, Wal-Mart faces plenty of challenges. Higher labor costs and the need to invest in its online retail presence will put demands on the company's income statement, and Wal-Mart also has to pay attention to the efforts of its brick-and-mortar rivals both in the big-box arena and among smaller-footprint dollar-store retailers.
At the same time, Wal-Mart has also retained its commitment to paying strong dividends. Its current yield is almost 3%, and that puts downward pressure on the stock price that keeps it from climbing to levels that would bring suggest the need for a split.
As a result, it's unlikely that Wal-Mart will do a stock split in 2017. Yet in the long run, what investors should watch more closely is whether the department store giant can regain some of the leadership that put it in its industry-dominating position in the first place. If it can, then further share-price gains will follow -- and investors won't necessarily care whether Wal-Mart splits its shares either now or in the future.
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