Walmart Is Down 24%. Is It Finally the Ultimate Dividend King Stock to Buy and Never Sell?

Key Points

• Walmart's payout has risen for 53 straight years, but its dividend yield lags the S&P 500 average.
• The company's P/E ratio is close to its average for the last five years.
• 10 stocks we like better than Walmart ›

Walmart (NASDAQ: WMT) stock has been on a rapid growth trajectory since the beginning of 2024. The company continued to post notable revenue increases even as the economy was often uncertain.

Now, the stock has fallen by 24% since it announced its earnings for the first quarter of 2026 in May. Sales growth seems to have slowed, and its Dividend King (Dividend Kings are companies that have increased their dividend for 50 or more consecutive years) status, built on 53 consecutive years of payout hikes, may not be attracting income investors.

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Now, the question is whether Walmart stock is a buy. I argue that investors should treat the retail stock as a hold for now, and here's why.

The Walmart value proposition

Indeed, Walmart stock likely remains a long-term winner, having sustained its competitive edge for years.

Walmart is now a leading omnichannel retailer. In recent years, it also pivoted into higher-margin businesses such as digital advertising and subscriptions. Additionally, it refocused on a strategy that spurred its competitive edge in its early years -- investing in its supply chain to lower fulfillment costs.

Those moves helped fund a growing dividend, but the years of success spurred a rising stock price, and with that, a P/E ratio that peaked at 49 earlier this year. Thus, it got to be priced for perfection, so investors sold off amid the less-than-perfect fiscal Q1 report.

The company became cautious about guidance amid rising gas prices at the time. Conditions do not appear to have changed in fiscal Q2, as the company guided to a 3% to 3.75% rise in net sales in fiscal Q3. That led to its biggest one-day drop since 2022 following the Q2 announcement.

That growth is well below levels from the first half of fiscal 2027 (ended July 31), when its $366 billion in revenue increased by 6.6% from the year-ago period. Also, its net income for the first two quarters of 2026 was $11.7 billion. That was only a 2% yearly gain, as a change in the fair value of equity investments weighed on earnings growth.

Amid those conditions, the stock's downward momentum continues. That has taken its P/E ratio to 37, a level near its five-year average. Also, its 0.95% dividend yield lags the S&P 500's average of 1.04%, making it difficult to attract income investors.

Amid these conditions, it appears that the market has priced Walmart fairly. Still, since the P/E ratio has fallen below 30 more than once over the last five years, investors may have good reason to hold out for a lower valuation.

Fortunately, such short-term conditions are unlikely to affect Walmart's long-term outlook. As the stock prices in the slowing growth, it could eventually begin to recover.

Walmart is a hold

Given Walmart's current state, investors should probably stand pat for now.

Amid the severity of the recent drop, the stock appears to be dealing with mild softness in its business and a lackluster dividend yield. Consequently, investors may be rethinking its valuation and could consider its 37 earnings multiple too high for such conditions.

However, investors have little reason to believe these are anything more than near-term challenges. Thus, if investors see a recovery in sales growth or a P/E ratio below 30, it might be time to start buying.

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Will Healy 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.