Unlocking Attractive Growth Prospects with Dividend-Paying Stocks
Finding dividend-paying stocks with promising growth prospects can be a challenging task. A company needs to have sufficient free cash flow to support business opportunities and pay dividends. Two companies that have consistently demonstrated their ability to do so are Walmart and Home Depot.
Walmart: A Household Name with a Strong Track Record
Walmart has become a ubiquitous presence in the retail landscape, serving 255 million customers every week through its namesake stores and Sam’s Club outlets. The company’s focus on keeping costs low has attracted shoppers in droves. While this core philosophy remains unchanged, management has been investing in technology to enhance the customer experience, including online ordering and same-day delivery in many locations.
The results have been impressive, with the core Walmart U.S. segment reporting a 5.3% increase in same-store sales in the fiscal third quarter, driven largely by e-commerce growth. The company’s adjusted operating income grew 6.2% in the quarter, excluding foreign currency translation effects. Management expects at least an 8.5% increase in profitability for the entire year.
Walmart has a long history of paying dividends, having declared its first dividend in 1974 and raising it annually since then. The company’s free cash flow of $6.2 billion during the first nine months of the year comfortably covered its $5 billion in dividend payments. The stock has gained over 71% in the past year, outperforming the S&P 500.
Home Depot: A Leader in Home Improvement
Founded in the late 1970s, Home Depot has grown to become the largest home improvement retailer by revenue, with over $150 billion in annual sales. The company’s results are closely tied to the economy, with people buying homes and undertaking construction projects when they feel confident about their financial situation.
Recently, Home Depot’s results have been impacted by larger economic forces, such as elevated interest rates and higher prices for basic items. However, there are signs of improvement, with existing home sales increasing 4.8% in November and the Federal Reserve cutting short-term rates.
Home Depot has increased dividends every year since 2010, and its 60% payout ratio indicates that the payment remains safe. While earnings have been dropping lately, the company remains well-positioned to benefit from improving economic conditions, which should drive sales and earnings growth.
Investing in Dividend Stocks for Long-Term Growth
Both Walmart and Home Depot offer attractive growth prospects and a history of paying consistent dividends. While their stock prices may fluctuate in the short term, they have demonstrated their ability to adapt to changing market conditions and deliver long-term growth.
Before investing in any stock, it’s essential to do your research and consider multiple perspectives. By adding these dividend stocks to your portfolio, you can potentially benefit from their long-term growth prospects and attractive yields.
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