We recently compiled a list of the top 10 Dividend Aristocrats according to Wall Street analysts. In this article, we’ll look at how Walmart Inc. (NYSE:WMT) stacks up against the other Dividend Aristocrats.
Changes in investment trends have opened up new insights for investors in recent years. Certain times call for certain investments, and often it is experienced investors who can spot these opportunities. However, it is clear that the value of a good investment remains stable even as changes occur. This is where long-term Dividend Aristocrats come in. These companies are strong dividend payers that have increased their payouts for at least 25 years in a row.
The longer periods of dividend increases have significantly increased the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with less volatility, according to a report by ProShares. In addition, these stocks have performed strongly in all market conditions, capturing 90% of the market gains while only suffering 82% of the market declines. Also read: The 10 best dividend aristocrats with over 3% returns.
Achieving 25 consecutive years of dividend growth is quite an accomplishment. Of the roughly 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats Index in 2024, underscoring that only a small number of companies have achieved this milestone. Maintaining a record of annual dividend increases for 25 years means that the company has managed to increase distributions to shareholders despite various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined capital management. Even Dividend Aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M failed to maintain their decades-long dividend growth streaks and were removed from the Dividend Aristocrats club this year, underscoring the importance of financial strength for Dividend Aristocrats. The financial vulnerability of these high-dividend companies was exposed by the Great Financial Crisis, when 17 of the 60 aristocrats were removed from the S&P 500 in 2008 and 2009.
As mentioned, Dividend Aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, senior managing director and portfolio manager at Wellington Management, has seen this performance in particular with the Vanguard Dividend Growth Fund he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 stock market crash, when the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount thanks to its dividend-generating stocks. When the market recovered, the fund quickly recouped its losses and outperformed many of its peers. Kilbride also mentioned that dividend growth is critical to weathering difficult markets and achieving long-term success, explaining that its benefits are significant and lasting.
According to analysts, it can be beneficial for those building their portfolio to incorporate dividend investing, especially if the dividends are reinvested. By using dividends to buy additional shares each time they are received, investors create a cycle where payouts increase with the number of shares held, resulting in the ability to acquire even more shares. In this article, we take a look at some of the best Dividend Aristocrat stocks according to analysts.
Our methodology:
For our list, we first went through a list of the best Dividend Aristocracy stocks, companies that have increased their dividends for 25 years or more in a row. From this group, we selected stocks with a projected upside of over 10% based on analysts’ price targets. The stocks are ranked by their upside potential (as of August 7). We also measured hedge fund sentiment on each stock, based on Insider Monkey’s database of 920 funds (as of Q1 2024).
Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).
A manager stands in a hypermarket and points to items available for wholesale sale.
Walmart Inc. (NYSE:WMT)
Analyst upside potential as of August 7: 10.9%
Walmart Inc. (NYSE:WMT) is an Arkansas-based retail company that operates a chain of hypermarkets and discount stores. In July, the stock hit its 52-week high when it traded at about $71 per share. This is because more shoppers are visiting its stores and increasingly using its e-commerce channels. In the first quarter of fiscal 2025, the company reported 21% year-over-year growth in its global e-commerce sales. The company’s revenue for the quarter was $161.5 billion, representing 6% growth over the same period last year.
Analysts say Walmart Inc. (NYSE:WMT) will benefit from its strong digital channels. With a significant portion of its customers online, the company can capitalize on two high-margin opportunities: digital advertising and third-party sales. Last quarter, its global advertising business rose 24%, with Walmart Connect growing 26% in the U.S. The stock has nearly 11% upside potential, according to Street analysts.
Walmart Inc. (NYSE:WMT) also has a strong balance sheet, which is positive news for income-seeking investors. At the end of the last quarter, the company had $9.4 billion in cash and cash equivalents. It generated $4.2 billion in operating cash flow and repurchased 18 million shares valued at $1.1 billion. The company’s dividend history is also strong, with 51 consecutive years of dividend growth. In February of this year, the company increased its dividend by 9% after accounting for the stock split, resulting in a new quarterly dividend of $0.2075 per share. With a dividend yield of 1.23% as of August 7, WMT is one of the best high-dividend stocks on our list.
At the end of the first quarter of 2024, 88 hedge funds tracked by Insider Monkey reported holdings in Walmart Inc. (NYSE:WMT), up from 85 in the previous quarter. These holdings have a total value of over $7.7 billion. Among these hedge funds, Fisher Asset Management was the company’s largest shareholder in the first quarter.
Total WMT takes 10th place on our list of the best Dividend Aristocrats to buy according to Wall Street Analysts. While we recognize WMT’s potential as an investment, we believe some highly undervalued dividend stocks promise higher returns and do so in a shorter time frame. If you’re looking for a highly undervalued dividend stock that has more promise than WMT but trades at less than 7 times earnings and yields nearly 10%, read our report on the dirt cheap dividend stock.
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Disclosure: None. This article was originally published on Insider Monkey.
