Walmart's Dividend Capacity: The India and China Growth Engine

The story of Walmart's international turnaround is not one of broad, steady expansion. It is a tale of concentrated, high-margin growth in two specific markets that are now the primary structural drivers of the segment's improved profitability and cash generation. While the overall international business grew 10.8% last quarter, the engine is clearly defined: China and India are delivering the most powerful returns.

China's contribution is both substantial and accelerating. In fiscal 2025, the China segment generated approximately $20 billion in net sales, a significant jump from about $17 billion the prior year. This growth is not just about volume; it is about the quality of that growth. The membership-based wholesale format, Sam's Club China, has emerged as a key growth engine, with its net sales increasing 21.8% in constant currency last quarter alone. This format commands higher margins and fosters customer loyalty, directly boosting the segment's financial profile.

India is the critical pillar of Walmart's multi-local strategy, and the company's long-term commitment is being actively reaffirmed. The market remains central to the digital ecosystem, with the Flipkart platform driving performance through localized events like the Big Billion Days. More broadly, the company recently marked its ongoing dedication with a major showcase event in New Delhi, celebrating partnerships and progress. This is not a side project; it is a core investment in a high-potential market where local innovations are shaping the future of the global retail model.

Together, these two markets are shifting the financial relevance of Walmart's international division. Their faster growth profiles and superior economics are improving the segment's operating income, as evidenced by a 16.9% adjusted constant-currency increase last quarter. The concentrated investment in China's wholesale model and India's digital commerce is now the clearest path to sustained profitability and enhanced cash flow for the global enterprise.

From Growth to Cash Flow: The Profitability and Capital Impact

The concentrated growth in China and India is now translating directly into a more profitable and cash-generative international business. This shift is the critical link between strategic investment and shareholder returns. The financial metrics are clear: the international segment's adjusted operating margin improved to 8.0% in constant currency last quarter, a direct result of the higher-margin sales mix from these markets. This isn't just top-line expansion; it's a fundamental upgrade in the business's economics.

The drivers of this improved profitability are scalable, high-margin formats. Sam's Club China, with its membership model, is a prime example, contributing to a 21.8% constant-currency sales increase in the country. More broadly, the company's global e-commerce platform, which grew 27% in Q3, is a key engine. These digital and membership-based channels offer superior returns compared to traditional retail, allowing Walmart to deploy capital toward areas of higher return while controlling costs.

This enhanced profitability fuels a strong capital position. The company's low payout ratio of 31.9% provides a substantial financial buffer. This ratio indicates that Walmart is returning less than a third of its earnings to shareholders as dividends, leaving ample room to reinvest in growth or to sustain and potentially increase distributions. The combination of rising margins and disciplined capital allocation creates a virtuous cycle: better returns fund further investment, which drives more growth and cash flow.

The bottom line is that the India and China growth story is no longer just about market share. It is about building a more resilient and efficient global business. The improved profitability and robust cash generation from these high-performing markets are the concrete financial foundation that supports Walmart's long-term commitment to its shareholders.

Catalysts, Risks, and Forward Look

The path from current momentum to sustained dividend capacity hinges on the successful execution of two distinct but critical fronts. The primary catalyst is the flawless implementation of Walmart's multi-local strategy in India. The company's recent showcase event in New Delhi was a public reaffirmation of its long-term commitment, but the real test is in scaling the Flipkart Group partnership. This alliance is the vehicle for driving the kind of localized innovation and market penetration that can replicate the high-margin, high-growth model seen in China. Investors should monitor whether this partnership continues to unlock scale, particularly in digital commerce and financial services, and whether it translates into measurable, profitable growth for the international segment.

At the same time, a primary risk looms in the form of currency headwinds and geopolitical uncertainty. The financial benefits of growth in China and India are realized in local currencies. Any significant depreciation of these currencies against the U.S. dollar would pressure the reported profitability and cash flow of the international business, directly impacting the pool of capital available for dividends. Geopolitical instability in key markets could also disrupt supply chains or consumer spending, adding another layer of pressure on margins.

For now, the most visible forward indicators are in the company's digital and advertising engines. Investors should watch for sustained growth in international e-commerce and advertising, which grew 27% and 53% respectively in the third quarter. These are not just vanity metrics; they are leading indicators of the higher-margin, scalable formats that are improving the segment's economics. If this acceleration continues, it will validate the strategic pivot and provide the financial runway for Walmart to maintain its disciplined capital allocation, including its low payout ratio, while funding future growth. The setup is clear: execution on the India strategy is the catalyst, currency and geopolitical risks are the overhang, and digital growth is the key performance barometer.