Investment objectives vary based on time horizon and risk tolerance. However, most well-diversified investors are probably looking for a balance of growth, income, and value stocks.
When scanning the market for dividend stocks to buy, it’s important not to fixate just on yield. Instead, invest in quality companies that have the potential to grow earnings and dividends. After all, a company that doesn’t have growth prospects may drastically underperform the market — and you would have been better off investing in other stocks or a high-yield savings account for income.
Walmart (NYSE: WMT), Target (NYSE: TGT), and Clorox (NYSE: CLX) have increased their dividends every year for decades. Moreover, all three companies have the potential to grow earnings and increase in value over time — so the investment thesis doesn’t revolve solely around passive income.
Investing $2,000 into each stock should produce at least $150 in annual dividend income. Here’s why all three dividend stocks are worth buying now.
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Walmart could continue producing outsized gains
At Friday’s closing price, Walmart yields just 1.2% — by far the lowest yield of any stock on this list. However, Walmart is a victim of its own success.
When a stock’s price outpaces the rate of dividend increases, the yield will go down. Up more than 29% year to date, Walmart is the best-performing component of the Dow Jones Industrial Average — better than Microsoft, Apple, and other growth stocks.
Walmart is a Dividend King, with over 50 consecutive years of dividend increases. In February, it raised its dividend by 9%, and there’s reason to believe the pace of dividend increases will continue to accelerate.
Walmart’s fiscal 2025 guidance is decent, but not great, with consolidated net sales expected to increase by at least 4%, consolidated adjusted operating income up at least 6%, and adjusted earnings per share (EPS) of at least $2.37. If that’s what Walmart has earned when its fiscal 2025 ends on Jan. 31, today’s price would give it a price-to-earnings ratio (P/E) of 28.7.
However, EPS can…
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