Walmart’s commitment to low prices makes it a go-to for consumers when the economy hits a rough patch.
Consumers bail on higher-end retailers and turn to Walmart when money is tight.
Walmart is a Dividend King, with 52 years of consecutive increases.
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When investing in a stock, you should always make your choice with the intention of holding on to it for a while. That’s basically what distinguishes long-term investing from day trading and playing the market. Beyond long-term investing, there is the idea of forever investing, where you buy stocks that you never plan to sell, regardless of any rough patch they may hit. My forever stock is Walmart (NASDAQ: WMT).
One reason I’m never selling Walmart stock is that it is as recession-proof or resistant a stock as you’ll find on the market. That’s one of the key attributes I look for when deciding to hold a stock for a lifetime.
When money is tight and consumers need to cut back on their budgets, there are more obvious things that typically get cut. It’s during these times that the newest smartphone isn’t a priority, that expensive restaurant gets passed over, and you learn to make do with the clothes you already have.
And yet, during these times, items like groceries, hygiene items (toothpaste, soap, etc.), cleaning items (dishwashing soap, laundry detergent, etc.), and medications likely won’t (and shouldn’t, in most cases) be cut. That’s where Walmart flourishes. It’s the poster child for a consumer staples stock.
There are plenty of places you can go to get those items, but Walmart has built its brand on providing some of, if not the, lowest prices on the market. So not only does it sell virtually everything someone could need, but it also sells it cheaper than almost all of its competitors.
Almost more than any retailer, Walmart benefits from the “trade-down” effect. When the economy isn’t ideal, or inflation has risen, people tend to leave higher-end retailers like Target, Amazon-owned Whole Foods, and Macy’s, and head to Walmart in search of a deal.
Part of Walmart’s longevity shows in its dividend, which has been paid out and increased for 52 consecutive years, making it a Dividend King (a company with at least 50 consecutive years of increases). When some dividend-paying companies hit a rough patch, they are forced to slash or suspend their dividend completely to save cash.
With Walmart, that’s not something investors have had to worry about, and it’s unlikely they will have to worry about it in the future. Walmart’s business is cash-flow-heavy and easily supports its dividend through the best and worst of economic times.
