THE Dow Jones Industrial Average is a great place to shop if you are an investor looking for passive income. This collection of 30 of the world’s largest publicly traded companies is full of companies that have excellent track records of earnings growth. Their dividend yields also provide instant cash returns, with high chances of steady annual increases for many years to come.
It also doesn’t take a very large investment to start generating this income stream. With an investment of $15,000 split roughly equally between Walmart (NYSE:WMT) And Home deposit (NYSE:HD), for example, you will receive approximately $300 per year, or 2% on your cost. Here’s why it’s an attractive option for dividend stock investors today.
Walmart is well placed
Walmart’s dividend yield is relatively low at 1.5%, but don’t let that scare you away from this stock. After all, the retailer checks all the right boxes for investors.
Sales growth was a healthy 5% year-over-year in the most recent quarter, putting it well ahead of peers like Target. These days, shoppers are more focused on saving money and purchasing consumer essentials like groceries, and this trend is driving Walmart’s focus on value.
Look beyond the headlines and there’s even better news for this retailer. Walmart’s customer traffic is solidly positive and shoppers are spending more with each visit. Profit margins are also improving. Of course, Walmart’s management team has made cautious comments about near-term growth trends. But its low inventory and strong traffic trends give it a good chance of continuing its positive momentum through 2024 and beyond.
Home Depot will bounce back
It’s understandable that Home Depot shares have lagged the market this year as rising interest rates have slowed the housing market. The company, however, has weathered many downturns, including the Great Recession. However, it emerged from each of these recessions to set new sales records. Expect another such rebound, potentially starting in 2024.
Home Depot expects same-store sales to fall between 3% and 4% this year, roughly in line with declines expected by its peers. Lowes. However, profits will remain high.
Home Depot’s operating margin is on track to remain above 14% of revenue. Home Depot is also one of the most efficient companies in the market in terms of return on invested capital. This is a sure sign that the management team knows how to allocate excess cash, whether it’s additional investments in e-commerce infrastructure, stock repurchases or increased dividends.
Home Depot aims to return 55% of its annual profits to shareholders in the form of dividend payments. That’s more generous than Lowe’s 35% target and is one of the reasons its yield is so high.
Of course, the dividend stocks could underperform if the economy enters a recession in the coming quarters. But that’s a normal part of the retail world. Income investors can look past these short-term fluctuations and focus on the bright future of Home Depot, which continues to capitalize on its dominant position in the attractive home improvement sector.
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Demitri Kalogeropoulos has positions at Home Depot. The Motley Fool posts and recommends Home Depot, Target and Walmart. The Motley Fool recommends Lowe’s Companies. The Motley Fool has a disclosure policy.
Want $300 in passive income? Invest $15,000 in these 2 Dow Jones dividend giants. was originally published by The Motley Fool
