Dividend growth stocks can be a valuable addition to your portfolio. These stocks typically have excellent fundamentals and top-line growth, and they can help shareholders build wealth through the magic of compounding.
Which dividend growth stocks are considered top buys this month? Retail giant Walmart (NYSE: WMT) and digital payment titans Visa (NYSE: V) stand out as two of the very best in the category.
Read more about these two elite dividend growers here.
1. Walmart: A retail giant
Walmart, with its wide economic moat, has proven time and again that it can adapt and thrive in the 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 shares have soared this year, up nearly 30% so far this year. While some may be wary of the company’s current valuation of 28 times forward earnings, its growth prospects justify the premium.
Sales are expected to grow by nearly 18% over the next two fiscal years, an exceptional rate of sales growth for a company of Walmart’s size.
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. What’s more, it recently announced a 9% increase in its payout, its largest in more than a decade. With a conservative payout ratio of 33%, Walmart has plenty of room to continue this rich tradition.
Walmart’s recent investments in artificial intelligence (AI)-driven automation are expected to reduce costs and increase profit margins in the coming years. This strategic move not only improves 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, combined with its commitment to technological innovation and shareholder returns, make the stock worth considering this month.
2. Visa: The Leader in Digital Payments
Visa is a formidable force in the digital payments space. Outside of China, Visa is the largest card payment 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 coming “intelligence glut” brought on by the AI revolution, this trend is likely to accelerate in the coming years.
While Visa’s current annualized yield of 0.79% seems modest, it’s the company’s dividend growth that really 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 fairly priced at 23 times forward earnings. While this figure represents a modest premium to the S&P 500 With Visa’s expected revenue growth of over 30% in 2024 and 2025, and an expected forward multiple of 22.6, Visa’s valuation is justified.
Looking at the bigger picture, the digital payments revolution is still in its infancy, with electronic transactions only recently surpassing cash payments globally. Visa is perfectly positioned to capitalize on this ongoing shift, setting the tone for continued growth and shareholder value creation 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
