Dividend growth stocks can be a valuable addition to a portfolio. These stocks tend to have excellent fundamentals and exceptional earnings growth, and they can help shareholders build wealth through the magic of compounding.
Which Dividend Growth Stocks Are the Top Buys This Month? A Retail Giant Walmart (NYSE: WMT) and the titan of digital payments Visa (NYSE: V) stand out as two of the best in the category.
Here is more information about these two elites dividend producers.
1. Walmart: A Retail Giant
Walmart, which enjoys a significant economic advantage, has proven time and again its ability to adapt and thrive in an ever-changing retail landscape. The company’s unmatched scale gives it a significant competitive advantage, allowing it to offer a wide range of products at unbeatable prices.
Walmart stock has had a strong run this year, up nearly 30% year-to-date. While some might balk at its current valuation of 28 times forward earnings, the company’s growth prospects justify the premium.
Revenue is expected to grow nearly 18% over the next two fiscal years, representing exceptional top-line growth for a company the size of Walmart.
What really sets Walmart apart as a dividend growth stock is its impressive dividend history. The retail giant has raised its dividend for 51 consecutive years. Plus, it recently announced a 9% payout increase, its largest in over a decade. With a conservative 33% payout ratio, Walmart has ample opportunity to continue this rich tradition.
Walmart’s recent investments in artificial intelligence (AI)-powered automation are expected to reduce expenses and increase profit margins in the coming years. This strategic move not only strengthens the company’s competitive position, but also adds an extra layer of security to its highly coveted dividend program.
Walmart’s unique position in the retail industry, combined with its commitment to technological innovation and shareholder returns, makes its stock worth considering this month.
2. Visa: the leader in digital payments
Visa is a formidable force in digital payments. Outside of China, Visa is the largest card payments company in the world.
Historically, its growth has been fueled by the global shift to electronic payments, a trend that shows no signs of slowing down. With the “intelligence abundance” that comes from the AI revolution, this trend is expected to accelerate in the coming years.
While Visa’s current annualized yield of 0.79% may seem modest, it’s the company’s dividend growth that really impresses. With a five-year compound annual growth rate of 15.7% and an extremely low payout ratio of 21.7%, Visa is an exceptional dividend growth stock.
Visa shares are also reasonably priced at 23 times forward earnings. While that figure represents a modest premium to the S&P 500 With a forward index multiple of 22.6, Visa’s expected revenue growth of over 30% over 2024 and 2025 justifies its valuation.
The digital payments revolution is still in its early stages, with electronic transactions only recently surpassing cash payments globally. Visa is uniquely positioned to capitalize on this ongoing evolution, setting the stage for continued growth and shareholder value creation in the years ahead.
Should You Invest $1,000 in Walmart Right Now?
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George Budwell has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa and Walmart. The Motley Fool has a disclosure policy.
The 2 Best Dividend Stocks to Buy in July was originally published by The Motley Fool
