29 Dec 2010 The Century Management Newsletter ( Portfolio )
...Wal‐Mart operates its business with tremendous efficiency and consistency. For example, over the past 10 years its profit margin has ranged between 3.1% and 3.6%. Its return on capital has been between 13.6% and 14.8%, and its return on equity has been between 19.1% and 20.8%. In addition, Wal‐Mart has a free cash flow yield of 4.4%, a dividend yield of 2.2% and it continues to buy back stock. Year‐to‐date, cash returned to shareholders through stock buy backs and dividends has been $9.37 billion, or $2.57 per share. Assuming no more share repurchases, Wal‐Mart will have paid shareholders $3.28 per share for the full year. This is 82.4% of the yearly earnings and represents a yield to shareholders of 6.4%. Chart 45 shows that over the past two‐, five‐, and ten‐year periods, its sales, cash flow, earnings, and book value are all up considerably more than the stock price. However, even though business fundamentals are up, over the past two years, the stock price has actually shown a decline of 11%...