When it comes to blue chip stocks that pay dividends and play defense, Walmart's (WMT) reputation is pretty tough to beat. And with the near-term outlook for stocks becoming increasingly opaque, it's understandable if investors are tilting toward more defensive names, such as WMT, these days.
As a low-beta stock, Walmart stock does tend to hold up better than the broader market when everything is selling off. Walmart's fundamentals are essentially defensive, too. As an anchor of the consumer staples sector, Walmart sees comparatively stable demand through the business cycle.
Walmart is also indisputably one of the best dividend stocks for dependable dividend growth. This member of the S&P 500 Dividend Aristocrats has increased its payout annually for 50 years and counting. For those reasons and more, Walmart ranks as one of analysts' top-ranked Dow Jones stocks.
Walmart's defensive characteristics certainly came in handy in 2022. The S&P 500 generated a total return (price change plus dividends) of -18.1%, a historically bad result. On the other hand, Walmart's total return came to -0.5% – or essentially flat – to beat the broader market by more than 17 percentage points.
The other side of WMT's defensive coin can be seen in its performance during 2023's remarkable rally. While the S&P 500 returned more than 26%, Walmart returned less than 13%.
Sadly for long-term shareholders, the past couple of decades have delivered more of the latter-type performance than the former. A torrid run in the 1990s, the market's secular preference for growth over value, and worries about Walmart's place in an increasingly digital world have conspired to make WMT stock a long-time market laggard.
The bottom line on Walmart stock
Walmart stock was actually one of the best stocks of the 30 years between 1990 and 2020, but as you can see in the chart below, WMT basically traded sideways for the first decade-plus of the 21st century.
Walmart shares went nowhere for a long time, but then that's not necessarily unusual given how far and fast they appreciated during the bubblicious 90s. Between the beginning of 1997 and the end of 1999, WMT gained more than 500% on a price basis. The broader market didn't quite double over the same span.
Also weighing on WMT during the first decade of the new century was the threat from e-commerce. Walmart responded by becoming the second largest e-commerce retailer in the U.S. after Amazon.com (AMZN) – albeit a distant second. Walmart got serious about its digital strategy sometime around 2006, but it took a while for what was regarded as "show-me" story to ultimately prove successful.
Whatever the causes, that lost decade on Walmart's stock chart really hurts its long-term results. Over the past 20 years, WMT stock has generated an annualized total return of 9.2% vs 10.7% for the S&P 500.
To get a sense of what that sort of underperformance looks like on a brokerage statement, have a look at the chart below.
This chart illustrates the disconcerting fact that if you invested $1,000 in Walmart stock 20 years ago, today it would be worth about only $5,800. The same thousand bucks invested in an S&P 500 ETF would be worth somewhere in the neighborhood of $7,600 today.
For its entire history as a publicly traded company, WMT's annualized total return does beat the broader market by a bit more than 7 percentage points. Over the more realistic time frame of the past 20 years, however, there's no way around it: Walmart has been a buy-and-hold bust.
