When a company makes a profit on a consistent basis they have many options of what to do with the money including paying dividends and buying back stock. One of the options which investors like to see is investing in other companies to understand them as they are doing something the company is not doing. This is called vertical integration or having a say from the raw materials to the finished product to the sales floor. All countries evolved a little bit different which means as a company moves beyond its borders on the founding country, it needs to understand and buy the best in the breed companies to increase its presence in the new country.

If you think about the US and China, after World War II, in the US suburbs developed with shopping malls as a center piece of the development. This led to stores developing into the model first it was Sears who took a leadership position. Later the shopping experience is led by Walmart. In China, which is the second largest economy of the world, the internet and mobile phone apps led to the normal pattern which people shop.

In an article by Kane Wu and Summer Zhen of Reuters, Walmart recently sold a $3.7 billion dollar stake in JD.com of China. Walmart had bought the stake 8 years ago and since then has changed the manner in which they operate and will focus on its own operations in China.

Walmart invested in JD.com in 2016 by selling its Chinese online grocery story Yihaodian to JD.com for a 5% stake in the company. Later Walmart increased its holding to 10%.

According to Thomas Hayes, Chairman at Great Hill Capital, Walmart wanted to get exposure in China in 2016 and learn the retail business. They now have their own exposure through Walmart and Sam’s Club stores and no longer need a minority interest in JD.com when they have a great business themselves.

In terms of Sam’s Clubs business grew 26% and there are now 48 Clubs in China.

Linking to dividend paying stocks, while the emphasis on the stock is what their core business is, most dividend producing stocks have investments in other companies as options for the future. The key is the future, due to the profits they can have a long-term outlook, and it is possible those companies will grow in value. In similar fashion, many companies own real estate which if all sold would lead to shareholder gains, but the real estate is not being sold at the moment. When you are doing your homework, those other holdings help protect your investments which is good thing.

There are more questions than answers, till the next time – to raising questions.