Walmart (WMT -1.87%) stock has been a massive winner for investors since its initial public offering in 1970. That's not surprising considering the company's business success. Walmart started out with one store in Rogers, Arkansas, in 1962. Today, it operates close to 10,500 stores and clubs in 19 countries and ranks as the world's largest retailer. In this article, we'll address how to buy Walmart stock, whether or not it's a good investment, and discuss Walmart's profitability, dividend program, and more.

How to buy Walmart stock

How to buy Walmart stock

There are four key steps involved in buying a stock -- and they are as applicable to Walmart as they are to any other stock.

Step 1: Open a brokerage account

• Commission structure (several online brokerages have eliminated trading commissions altogether).
• Educational resources.
• Ability to buy fractional shares.
• User-friendliness of the brokerage's platform.

Step 2: Figure out your budget

Speaking of funding the new brokerage account, you'll need to determine how much money you can afford to invest. The best way to do this is to create a budget if you haven't already done so. Identify all of your sources of income and all of your ongoing expenses. It's wise to first fund an emergency fund with at least three to six months of expenses before investing in stocks.

Step 3: Do your research

Whether you're considering investing in Walmart or any other stock, it's important to research the stock before buying. Warren Buffett has stated that he and his longtime business partner, Charlie Munger, "are not stock-pickers; we are business-pickers." That's a great philosophy for any investor to have.

• Walmart U.S. -- the company's largest segment, which operates retail stores in all 50 U.S. states, Washington, D.C., and Puerto Rico.
• Walmart International -- the second-largest segment, which operates retail stores in 19 countries outside of the U.S.
• Sam's Club – the company's members-only warehouse club, which operates stores in 44 U.S. states and Puerto Rico.

With any stock you're considering, investigate the competitive advantages of its business. In Walmart's case, the company views its everyday low pricing as a major competitive advantage. Walmart's supply chain and operational efficiency help it to offer low prices on products sold in its stores and online.

Consider major industry trends, as well as any headwinds. Walmart competes in the discount stores industry. As is the case with the broader retail market, the use of technology is a major factor affecting discount retailers. Walmart has distinguished itself through the years with its early adoption of technology. One key area to watch with the company is how it continues to implement artificial intelligence (AI) in its operations.

A great business doesn't always translate to a great stock to buy, though. The stock's valuation could be higher than the underlying business is really worth. There are several metrics you can use to assess a stock's valuation, including the price-to-earnings (P/E) ratio and price-to-sales (P/S) ratio.

Step 4: Place an order

Note that the trading symbol (or stock ticker) for Walmart is WMT. Fidelity supports the capability to buy fractional shares. If you're buying a fractional share of Walmart, you'll specify the dollar amount you're investing in step four. Otherwise, you'll enter the number of shares you want to buy.

Step five asks you which order type you want to use -- market order or limit order. Using a market order will allow you to buy the stock immediately at the current market price. A limit order will only be executed if the stock is at or below the share amount specified. The Motley Fool recommends using market orders because they ensure your stock purchase will be executed immediately.

Should you invest?

Should I invest in Walmart?

If you're an aggressive investor focused on growth stocks, Walmart might not be ideal for you. The company's fastest growth is probably in its past.

Value investors might not like Walmart all that much, either. Its shares trade at a relatively high valuation compared to other discount retail stocks.

Income investors, on the other hand, could prize the dependability of Walmart's dividend payments. Conservative investors should also like the resilience of the company's business. For example, Walmart stock tends to perform better than most during economic downturns and is widely viewed as something of a recession-proof stock.

Profitability

Is Walmart profitable?

However, discount retailers typically have relatively low profit margins. Walmart is no exception, with its net profit margin of a little less than 2% in its most recent fiscal year.

Also, the company's profits have declined in recent years. This is primarily due to the increasing cost of sales, with inflation driving product prices higher.

Dividends

Does Walmart pay a dividend?

Walmart does pay a dividend. The company initiated its dividend program in 1974 and has increased its dividend for 50 consecutive years. That track record makes Walmart a member of the elite group of stocks known as Dividend Kings.

ETFs

ETFs with exposure to Walmart

More than 270 exchange-traded funds (ETFs) own shares of Walmart. That's not surprising considering that the retailer ranks among the biggest companies in the world. Major ETFs that are heavily invested in Walmart include:

• Amplify CWP Enhanced Dividend Income ETF (DIVO 0.0%)
• Consumer Staples Select Sector SPDR Fund (XLP -0.68%)
• Fidelity MSCI Consumer Staples Index ETF (FSTA -0.38%)
• iShares Global Consumer Staples ETF (KXI -0.54%)
• iShares U.S. Consumer Discretionary ETF (IYC 0.2%)
• iShares U.S. Consumer Focused ETF (IEDI 0.49%)
• Pacer BioThreat Strategy ETF (VIRS 1.17%)
• PGIM Jennison Focused Value ETF (NYSEMKT:PJFV)
• VanEck Retail ETF (RTH 0.01%)
• Vanguard Consumer Staples ETF (VDC -0.57%)

Because Walmart is a member of the Dow Jones Industrial Average and S&P 500, it is also a holding of all ETFs that track these indexes. They include:

• SPDR Dow Jones Industrial Average ETF Trust (DIA 0.23%)
• SPDR S&P 500 ETF Trust (SPY 0.17%)
• Vanguard 500 Index Fund ETF (VOO 0.26%)

Stock splits

Will Walmart stock split?

Related investing topics

The bottom line on Walmart

Walmart stands out as one of the most successful retail stocks ever. Its stability, competitive advantages, and impressive dividend track record should make it an attractive pick for many investors.