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Worried About Wal-Mart's Dividend Growth Prospects? Consider Kroger

Concern abounds in the investing community regarding the recent earnings guidance provided by Wal-Mart executives.

Wal-Mart dividend growth has slowed to a crawl over the past couple of years.

Kroger is one of the leading competitors that Wal-Mart has to deal with in the grocery business.

Kroger has shown solid earnings and dividend growth in recent years and is in a strong position to provide additional dividend growth going forward.

The past week or so has provided quite a bit of buzz in the investing community regarding the recent forward earnings guidance provided by Wal-Mart (NYSE:WMT). This retailing giant has been a strong source of growth in both capital appreciation and dividends over a period that's literally spanned decades. However, with upcoming investments in employees and e-commerce taking up a large portion of potential profits over at least the next two years, many investors became worried about Wal-Mart. A 10 percent drop on the day of the announcement and a softer decline over the past couple of weeks has led people to question whether Wal-Mart is a good buy at this time. Add in dividend growth that has totaled a penny each quarter over the past two years, some dividend growth investors have concerns.

Even with dividend growth of around 2 percent in each of the last two years, Wal-Mart's current payout ratio is just below 44 percent of earnings per share according to This means that even a decline in EPS over the next couple of years should still support the dividend at current levels. Its P/E ratio of around 13 is less than it has been in recent years. However, the lower earnings level would likely preclude the awarding of shareholders with a massive dividend increase over the short term. I hold a bit of Wal-Mart stock and think that it's a good long-term hold. I like its current yield that's near 3.4 percent, and I...