Has Walmart Stock Been Good for Investors?

It's difficult for stock pickers to consistently beat a passive index like the S&P 500 (SNPINDEX: ^GSPC).
That's why index investing has become so popular. But individual investors can find market-beating stocks. And they can ride these winners, providing they still believe in the company's long-term prospects.

Walmart (NYSE: WMT) has become a household name, and it's a familiar company to investors, having conducted its initial public offering (IPO) in 1970. But how has the stock performed over the last five years compared with the S&P 500?

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Comparing total returns

Over the last five years through Nov. 27, Walmart's stock price gained 117.3%, easily besting the S&P 500's increase of 87.5%. However, that doesn't tell the whole story.

You also need to factor dividends into the equation. In fact, Walmart has increased its dividend payout annually for the last 52 years, making the company a Dividend King. Most recently, the board of directors increased the payout by 13% earlier this year.

Walmart's stock produced a total return, including dividends, of 131.4%. During this period, the S&P 500 index returned 101.6%. Hence, Walmart's shares returned 29.8 percentage points more than the index over the past five years.

Will patience continue to pay off?

Clearly, investing in Walmart's stock paid off for patient investors. This shows the benefit of picking strong, successful companies and sticking with them.

What about going forward? Walmart's simple vision of operating an ultra-low-cost business so that it can charge customers rock-bottom prices puts the company in a strong competitive position.

It's a business that remains set up for long-term success. Currently, when many retailers have struggled due to consumers feeling stressed by high prices and a weakening job market, Walmart continues to thrive.

You can see this by looking at the company's same-store sales (comps). Walmart U.S., its core division, experienced a 4.5% comps increase in the fiscal third quarter (ended Oct. 31). Impressively, higher traffic during the quarter contributed 1.8 percentage points, with management citing gains across various income groups. Higher spending accounted for the balance of the increase.

Management isn't standing still, either. It continues to invest heavily to make the customer shopping experience better, including faster delivery. Most of Walmart's capital expenditures are aimed at supply chain improvements, customer-facing initiatives, and other technology.

A successful business executing well, combined with investing in the future to remain competitive, is a powerful combination. That puts Walmart in a strong position to continue posting strong results, which should continue fueling market-beating stock returns for the long haul.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.