We recently compiled a list of the 10 Best Dividend Aristocrat Stocks To Buy Right Now. In this article, we are going to take a look at where Walmart Inc. (NYSE:WMT) stands against the other dividend aristocrat stocks.
Investors usually buy stocks with the expectation that their value will increase as the company grows more profitable. However, stocks can offer additional advantages. As businesses succeed and mature, they often choose to distribute a portion of their profits to shareholders as cash dividends. Even more appealing are companies that not only pay dividends but consistently increase them year after year. These stocks have delivered impressive performance over time compared to other asset classes.
According to a report by Thornburg Investment Management, from 1990 to 2023, bond yields, represented by the Bloomberg U.S. Aggregate Bond Index, fell significantly from nearly 9% to 3.41%. Similarly, equity yields, reflected by the dividend payouts on the Dividend Aristocrats Index, declined from just over 3% to 2.42% during the same period. The Dividend Aristocrats Index tracks large-cap, blue-chip US companies within the broader market that have consistently increased their dividends for at least 25 consecutive years. The report further mentioned that dividend-paying stocks can not only offer a source of current income with the potential for growth over time but also help investors bring greater stability to their portfolios in the long run. The report cited Bloomberg’s data and highlighted that dividend aristocrats delivered an 11.63% return to shareholders between 1990 to 2023, compared with a 10.2% return for the broader market.
Excluding the aristocrat factor from dividend stocks highlights their significance in overall market returns. A report by S&P Dow Jones Indices reveals that since 1926, dividends have accounted for roughly 32% of the broader market’s total returns, with the remaining 68% coming from capital appreciation. This demonstrates that both steady dividend income and the potential for capital growth play crucial roles in shaping total return expectations. The report also highlighted the significant impact of compounding when it comes to dividends. Without dividends, the market’s return from January 1, 1930, to the end of July 2023 would have grown to 214%. However, if dividends had been reinvested during the same period, the return would have reached an impressive 7,219%.
Also read: 8 Magnificent Dividend Growth Stocks to Buy Now
The dividend aristocrat index has delivered a 12.5% return since the start of 2024, underperforming the broader market that has returned nearly 27%. Although dividend stocks have lagged in performance this year, companies continue to increase their payouts, reflecting investor preferences steadily. According to a recent report from S&P Dow Jones Indices, 480 dividend increases were recorded in Q3 2024, compared to 448 in Q3 2023, representing a 7.1% year-over-year growth. The total value of these increases for the quarter reached $14.1 billion. Over the past 12 months, dividend increases amounted to $74.7 billion, up from $63.9 billion in the previous year.
Our Methodology:
For this article, we first listed down all dividend aristocrat stocks — the companies with 25+ years of consecutive dividend increases. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them, as per Insider Monkey’s Q3 2024 database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A manager standing in a hypermarket, pointing out items available for wholesale.
Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 88
Walmart Inc. (NYSE:WMT) is an American retail corporation that operates a chain of hypermarkets, discount stores, and grocery stores across the country. The company has seen an increase in customer traffic this year, with a 3% rise in the third quarter compared to the same period last year. This is a positive development for any major retailer. WMT is delivering exceptional returns this year, surging by over 68% since the start of 2024.
Walmart Inc. (NYSE:WMT)’s competitive strengths are driving significant financial benefits for its investors. Both cash flow and profitability are improving, fueled by more than just increased market share. The company’s e-commerce segment is now generating profits after years of substantial investment in its infrastructure. Additionally, strategic moves like price reductions and streamlined inventory management have yielded positive results.
In the third quarter of 2024, Walmart Inc. (NYSE:WMT) reported revenue of $168 billion, up 5.5% from the same period last year. The revenue beat analysts’ estimates by $1.4 billion. Being a strong dividend payer, the company boasts a solid cash position. Year-to-date, it has generated $22.9 billion in operating cash flow, an increase of $3.9 billion from the same period last year. The company’s free cash flow also increased by $1.9 billion on a YoY basis at $6.2 billion. It is one of the best dividend aristocrat stocks on our list with 51 consecutive years of dividend growth. The company’s quarterly dividend comes in at $0.2075 per share, for a dividend yield of 0.93%, as of November 25.
According to Insider Monkey’s database of Q3 2024, 88 hedge funds held stakes in Walmart Inc. (NYSE:WMT), compared with 95 in the previous quarter. These stakes are worth over $9.7 billion in total.
Overall WMT ranks 1st on our list of the best dividend aristocrat stocks to buy. While we acknowledge the potential for WMT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.