Dividend growth stocks can be a valuable portfolio add. These stocks tend to have stellar fundamentals and outstanding revenue growth, and they can help shareholders build wealth through the magic of compounding.
Which dividend growth stocks screen as top buys this month? Retail giant Walmart (NYSE: WMT) and digital payments titan Visa (NYSE: V) stand out as two of the very best in the category.
Here’s more on these two elite dividend growers.
1. Walmart: A retail behemoth
Walmart, with its wide economic moat, has proven time and again its ability to adapt and thrive in the ever-changing retail landscape. The company’s unrivaled scale provides it with a significant competitive advantage, allowing it to offer a wide array of products at unbeatable prices.
Walmart’s stock has been on a tear 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 projected to surge by almost 18% over the next two fiscal years, which is exceptional top-line growth for a company of Walmart’s size.
What truly sets Walmart apart as a dividend growth stock is its impressive dividend history. The retail giant has increased its dividend for 51 consecutive years. Moreover, it recently announced a 9% boost to the payout, its largest in over a decade. With a conservative payout ratio of 33%, Walmart has ample room to continue this rich tradition.
Walmart’s recent investments in artificial intelligence (AI)-powered automation are expected to lower expenses and boost profit margins over the next several years. This strategic move not only enhances the company’s competitive position, but also adds an extra layer of security to its coveted dividend program.
Walmart’s unique position in the retail industry, coupled with its commitment to technological innovation and shareholder returns, makes its stock worth considering this month.
2. Visa: The digital payments leader
Visa is a formidable force in the digital payments space. Outside of China, Visa stands as the largest card payment company in the world.
Historically, its growth has been fueled by the global shift toward electronic payments, a trend that shows no signs of slowing. With the coming “abundance of intelligence” stemming from the AI revolution, this trend is likely to accelerate in the years ahead.
While Visa’s current annualized yield of 0.79% might appear modest, it’s the company’s dividend growth that truly impresses. With a five-year compound annual growth rate of 15.7% and a rock-bottom payout ratio of 21.7%, Visa is a standout dividend growth stock.
Visa’s shares are also reasonably priced at 23 times forward earnings. While this figure represents a modest premium relative to the S&P 500 index’s 22.6 forward multiple, Visa’s projected top-line growth exceeding 30% over 2024 and 2025 justifies its valuation.
Turning to the big picture, the digital payments revolution is still in its early stages, with electronic transactions only recently surpassing cash payments globally. Visa is perfectly positioned to capitalize on this ongoing shift, setting the stage for sustained growth and value creation for shareholders in the years to come.
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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.
2 Top Dividend Growth Stocks to Buy in July was originally published by The Motley Fool
