This Dividend King Stock Just Offered a Superb Buy-the-Dip Opportunity
Key Points
Dividend Kings are some of the most reliable stocks you can buy.
Walmart's stock price has recently taken a hit.
There are still plenty of reasons to like this dependable dividend payer.
Dividend Kings are some of the most reliable companies you can own, as they have consistently increased their dividend payouts for 50 or more consecutive years. But a lot of the companies that have earned the Dividend King title, like Coca-Cola, Johnson & Johnson, and Procter & Gamble, are not known for their stock price appreciation.
Walmart (NASDAQ: WMT), however, has not only increased its dividend payout for the past 53 years, but has also offered shareholders a 150% return over the past five years. That reliable dividend, paired with stock price appreciation potential, is currently setting up a compelling buy-the-dip opportunity.
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Caution leads to a stock price decline
The retailer largely met expectations for its fiscal 2027 first quarter, ended April 30, but the stock price still dropped more than 9% from May 20 to May 26. The reason was a cautious outlook.
Walmart kept its 2027 full-year forecast intact, while investors were hoping for a boost. It also gave guidance for the current quarter that was below expectations.
The markets also latched onto the company's comments about higher fuel costs, which investors worried would weigh not only on Walmart's distribution and fulfillment costs, but on consumers as well.
Everything that was missed from the quarter
Walmart's stock price has climbed so high compared to other Dividend Kings over the last several years because it's leaning into technology exceptionally well. The introduction of a Walmart subscription plan may have seemed odd when it was introduced in 2020, but it's paying off. Walmart+ members spend 4 times more than nonmembers, and for the quarter, its Walmart+ fee revenue was up double digits.
Advertising is also becoming a bigger part of the business, with revenue from that segment up 36% in the quarter. Its subscription plan, advertising, and online sales are all revenue generators Walmart can keep growing. And while Walmart generally strikes a cautious tone in its earnings reports, there was still a lot of optimism from the management team.
"I want to be really clear, like we are probably as excited about the potential of our business today than at any point in time in the last few years," CFO John Rainey said on the earnings call. "So I don't think tamping or metering expectations is necessary."
Investing for the long term
Walmart will have to navigate its way through higher fuel costs, but it's also navigated through an array of issues over the last 53 years and still has been able to consecutively increase its dividend payouts. The yield on the dividend payout is on the smaller side at 0.8%, but a company with a sustainable payout that is also paired with stock price appreciation for bigger total returns offers a compelling buy-the-dip opportunity.
Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.