If you work at Walmart, you have a great opportunity to buy company stock at a discount through payroll deductions. Walmart‘s Associate Stock Purchase Plan (ASPP) makes it simple to invest in Walmart‘s future success.
Should you participate in Walmart‘s employee stock purchase plan? Here is an in-depth guide on how the program works, its costs and benefits, and what to consider before investing in Walmart stock.
How Does Walmart‘s Employee Stock Purchase Plan Work?
Walmart offers its more than 1.6 million U.S. employees the option to buy Walmart stock through automatic payroll deductions. You can contribute from $2 up to $125,000 per year.
The key features of Walmart‘s plan include:
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15% match on contributions: Walmart will match 15% of the first $1,800 you contribute per year. So if you invest $1,800, you‘ll receive a $270 match from Walmart.
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$2.24 per share dividend: Walmart pays a cash dividend on the stock you purchase. Recently increased to $2.24 annually per share.
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Payroll deductions: Money to buy stock comes straight out of your paycheck. You can do a lump sum or steady weekly or monthly deductions.
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$20 enrollment fee: You pay a one-time $20 non-refundable fee to set up your stock plan account.
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Account management: Your stock is held in a Computershare account. You can sell shares at any time for a small transaction fee.
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Initial investment: You must invest either an initial $250 lump sum or commit to 10 weekly $25 deductions to enroll.
Here is an example of how the match works. Let‘s say you contribute $100 per month over 12 months, equaling $1,200 for the year. Walmart would match 15% of that, giving you an extra $180 in stock.
So for a $1,200 investment, you‘d end up with about $1,380 in Walmart stock thanks to the 15% company match. Plus you‘ll earn $2.24 annually in dividends for each share you own.
The Costs of Investing in Walmart Stock
While there are many benefits, participating in Walmart‘s employee stock purchase plan does involve some costs:
- $20 enrollment fee when you first sign up
- Transaction fees to sell shares, around $25 per trade
- If you leave Walmart, there is a $35 annual account maintenance fee to keep your stock
- Potential taxes if you sell the stock down the road after it appreciates
However, the dividends and company match generally offset these costs over time. For example, if you invested $1,800 for five years and sold, you might earn $750 in dividends and $1,350 in Walmart matching contributions.
The Benefits of Buying Walmart Stock
Along with the 15% match and steady dividends, here are some of the benefits of participating in Walmart‘s employee stock purchase plan:
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Ownership in Walmart: Purchasing stock gives you an ownership stake in the company you work for. You benefit when Walmart succeeds.
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Long-term growth potential: Over the past 10 years, Walmart stock has delivered annualized returns around 14%, despite low volatility.
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Discounted stock: The 15% match is like getting a discount on your stock purchase.
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Convenient payroll deductions: Money comes straight from your paycheck so contributing is easy.
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Exclusive opportunity: You can only participate in this plan as a Walmart employee. Once you leave, you can no longer purchase additional shares.
What Happens If You Leave Walmart?
If you leave Walmart, you have two options with your stock purchase account:
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Cash out: You can contact Computershare and liquidate your shares. The proceeds, minus applicable fees, will be sent to you via check or direct deposit. For the fastest payment, wait until after you receive your last paycheck from Walmart to sell.
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Keep the account: You can hold onto your Walmart stock in your Computershare account by paying a $35 yearly maintenance fee. You won‘t be able to buy additional stock through payroll deductions. But you can still make cash purchases if you want to continue growing your holdings.
Either way, the Walmart stock you purchased is fully owned by you, even after you separate from the company. The choice comes down to whether you want to remain invested in Walmart.
How Has Walmart Stock Performed?
Over the past 10 years, Walmart stock (WMT) has delivered steady price appreciation and dividend growth:
- 14% average annual return over the past decade
- 10-year stock price increase of 230%
- 48 straight years of dividend increases
- Current $2.24 per share annual dividend
This chart shows Walmart‘s consistent stock price growth over the past 10 years:
Data source: Macrotrends
Walmart‘s revenues, profits, and dividends have increased reliably over time. Its stock tends to be low volatility, trading in a relatively predictable range. For a buy-and-hold investor, Walmart offers stable long-term returns.
Should You Participate in Walmart‘s Stock Purchase Plan?
Here are some things to consider when deciding whether to buy Walmart stock as an employee:
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Investment goals: Does owning Walmart stock align with your broader investment objectives? What‘s your risk tolerance? Desired returns?
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Time horizon: Walmart stock is a good long-term holding of 10+ years. Don‘t invest here if you need money in the short term.
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Diversification: Walmart should be just one piece of a diversified portfolio. Don‘t put all your eggs in one basket.
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Dividend reinvestment: Reinvesting Walmart dividends over time can significantly increase your total return through compounding.
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Employee perks: Beyond investment returns, being a shareholder gives you extra pride and ownership in the company.
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Planlimits: Keep in mind the $1,800 match cap and $125,000 purchase limit if you want to invest large amounts.
For a long-term Walmart employee looking to share in the company‘s continued success, participating in the stock purchase plan can be a smart move. Just be sure to diversify and reinvest those dividends!
How Does Walmart‘s Plan Compare to Other Retailers?
Walmart offers one of the most generous employee stock purchase programs in retail. Here is how Walmart compares to key competitors:
| Company | Match % | Max Match | Purchase Limit |
|---|---|---|---|
| Walmart | 15% | $270 | $125,000 |
| Target | N/A | N/A | $25,000 |
| Amazon | 10% | $150 | $25,000 |
| Costco | N/A | N/A | $25,000 |
As you can see, Walmart stands out with its 15% match on contributions up to $1,800 per year, well above Amazon and other major chains. This match incentive makes the Walmart plan very appealing compared to competitors.
The Tax Implications of Buying Walmart Stock
If you participate in Walmart‘s ESPP, you should understand the potential tax implications:
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The 15% company match is taxed as ordinary income. You pay taxes on this just like regular wages.
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Dividends are taxed at your capital gains rate in the years you receive them. Rates vary from 0% up to 20% depending on your income.
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When you eventually sell shares, you‘ll pay capital gains taxes on any profits above the purchase price. The long-term rate is 0%-20% depending on income.
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If you sell at a loss, you can claim capital losses to offset capital gains or reduce your taxable income by $3,000.
Consult a tax professional to fully understand how buying Walmart stock will impact your specific situation. Taxes should not deter you from participating but are worth planning for.
Real-Life Examples of Employees Succeeding with the Plan
To give you an idea of the potential returns, here are a few examples of long-time Walmart employees who have done well by consistently investing in Walmart stock over the past 10-15 years:
Sarah J. invested $2,000 per year for 15 years. With the 15% match, Sarah accumulated over $40,000 worth of Walmart stock. She‘s earned over $10,000 in dividends along the way.
Michael R. invested the maximum $1,800 per year for 10 years. With the company match and 5% annual stock price growth, he has $35,000 in Walmart stock now.
Alicia P. set up automatic $200 per month deductions from her paycheck. She‘s never sold a share in her 7 years at Walmart and now has $18,000 in stock.
Brian T. initially invested $5,000 lump sum when he started at Walmart, then $100 per month going forward. A decade later, through dividends and growth, his initial $5,000 became over $15,000 in stock.
The key is consistency. By reinvesting dividends and sticking to it long-term, Walmart employees have achieved impressive returns through the stock purchase plan.
Final Thoughts on Investing in Walmart Stock
Walmart offers its employees an excellent opportunity to share in the company‘s growth. For long-term investors, the employee stock purchase plan can generate solid total returns through the 15% match, dividends, and compounding growth.
Just be sure to hold the stock for at least 5-10 years, diversify your portfolio, and reinvest those dividends. By regularly investing even small amounts, you can accumulate meaningful wealth in Walmart stock over time.
While there are costs involved, if you plan to be at Walmart for many years, participating in the stock purchase program is well worth considering. You can take pride in owning a piece of an iconic American company – and profit from Walmart‘s continued success.
