3 Discount Store Stocks to Add to Your Dividend Portfolio
Amid increasing inflation, supply chain issues, and a decline in consumer spending, it may be profitable to invest in discount store stocks with high dividend yields. So, here are the...
Amid increasing inflation, supply chain issues, and a decline in consumer spending, it may be profitable to invest in discount store stocks with high dividend yields. So, here are the three dividend-paying store companies—Walmart (WMT), Costco (COST), and Target (TGT)—that we think are safe bets now. Read on.
The COVID-19 omicron variant caused brick-and-mortar stores to take a second hit, as people began social distancing again amid rising COVID-19 cases worldwide. However, the e-commerce presence of popular retail companies helped mitigate the impact of the omicron wave.
Discount store chains are witnessing increasing sales, given rising prices. With 40-year-high inflation rates upping the prices of virtually every product, consumers have been shopping at discount stores to lower their consumption expenditures. So, investing in high dividend-yielding discount store stocks could potentially reap higher earnings and provide a regular source of income despite the market's volatility and inflationary pressures.
Walmart Inc. (WMT)
WMT is a leading American multinational retail and wholesale corporation. The Bentonville, Ark.-based company offers an assortment of merchandise and services at low prices. It operates through three segments: Walmart U.S.; Walmart International; and Sam's Club. WMT operates supercenters, supermarkets, warehouse clubs, and e-commerce websites.
On Jan. 31, 2022, WMT's Sam's Club released its debut commercial during football's biggest game of the year. With this ad release, the company is expected to expand its customer base and reach new potential customers.
On Jan. 26, 2022, WMT entered a long-term strategic partnership with an equity investment in Plenty Unlimited Inc. to deliver fresh produce to its retail stores by utilizing Plenty's indoor vertical farming technology platform. With this partnership, WMT is expected to accelerate agricultural innovation, deliver a new product category, and boost the company's profits.
And on Jan.20, 2022, WMT announced plans to build a fulfillment center in Olive Branch, which is set to open in Spring 2022. This new opening might support WMT's increasing supply chain network and eCommerce capabilities.
In its fiscal year 2022 third quarter, ended Oct. 31, 2021, WMT's constant currency total revenues increased 3.3% year-over-year to $139.16 billion. WMT's constant currency net sales increased 3.1% year-over-year to $137.86 billion. And the company's adjusted earnings per share increased 8.2% from the year-ago value to $1.45.
WMT pays $2.20 as dividends annually, yielding 1.6% on the current share price. The company's dividends have increased at a 2.1% rate over the past five years.
The $567.61 billion consensus revenue estimate for its fiscal year 2022 ended January 31, 2022, represents 2.2% year-over-year growth. The $6.41 consensus EPS estimate for fiscal 2022 indicates 17% year-over-year growth. Also, WMT has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
WMT's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
WMT has a B grade for Value, Growth, Quality, Stability, and Sentiment. Within the A-rated Grocery/Big Box Retailers industry, it is ranked #4 of 39 stocks. To see additional POWR Ratings (Momentum) for WMT, click here.
Costco Wholesale Corporation (COST)
COST operates membership warehouses in the U.S., Canada, Puerto Rico, the United Kingdom, Mexico, Australia, China, Japan, and other countries together with its subsidiaries. The Issaquah, Wash.-based concern offers branded and private-label products in a wide range of merchandise categories. It operates more than 816 warehouses.
COST's total revenue increased 16.6% year-over-year to $50.36 billion in its fiscal year 2022 first quarter, ended Nov. 21, 2021. COST's operating income grew 18.4% year-over-year to $1.69 billion. Its net income attributable to Costco improved 13.6% year-over-year to $1.32 billion. And the company's net income per common share attributable to Costco increased 13.7% from its year-ago value to $2.98.
COST pays $3.16 as dividends annually, yielding 0.6% on the current share price. The company's dividends have increased at an 11.9% rate over the past five years.
Analysts expect COST's revenue for its fiscal year 2022 second quarter, ending February 28, 2022, to come in at $51.38 billion, representing a 14.8% rise year-over-year. The Street expects the company's EPS for the to-be-reported quarter to come in at $2.73, representing a 27.3% increase year-over-year.
Shares of COST have increased 45.6% in price over the past year and closed yesterday's trading session at $518.48.
COST has an overall B rating, which translates to Buy in our POWR Ratings system. It has a B grade for Sentiment. It is ranked #20 of 39 stocks in the A-rated Grocery/Big Box Retailers industry. Click here to see COST ratings for Momentum, Stability, Growth, Value, and Quality.
Target Corporation (TGT)
TGT in Minneapolis, Minn., is a general merchandise retailer in the U.S. The company offers a wide range of products in various categories, including food assortments, apparel, accessories, home décor, electronics, toys, beauty, home essentials, and other merchandise. It operates more than 1,897 stores.
Last December, TGT introduced fast and easy solutions for last-minute holiday shoppers, including great deals and same-day services like Drive Up and Order Pickup, Same-Day Delivery with Shipt. With these offerings during the holiday season, the company is expected to boost its sales and revenues streams.
In its fiscal 2022 third quarter, ended Oct. 30, 2021, TGT's total revenues increased 13.3% year-over-year to $25.65 billion. TGT's earnings before income taxes grew 47.2% year-over-year to $1.91 billion. Its net earnings rose 46.7% from the same period last year to $1.49 billion. And the company's earnings per share increased 51.2% from the year-ago value to $3.04.
TGT pays $3.60 as dividends annually, yielding 1.7% on its current share price. The company's dividends have increased at a 6.4% rate over the past five years.
The $31.48 billion consensus revenue estimate for its fiscal fourth quarter, ended Jan. 31, 2022, represents 11.1% year-over-year growth. The $2.86 consensus EPS estimate for its fiscal third quarter indicates 7% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, shares of TGT have gained 11.1% in price and closed yesterday's trading session at $213.84.
TGT's strong fundamentals are reflected in its POWR Ratings. The company has an overall B rating, which translates to Buy in our proprietary rating system. TGT has a B grade for Value and Quality. Among the 39 stocks in the A-rated Grocery/Big Box Retailers industry, it is ranked #13. Click here to see the additional POWR Ratings for Momentum, Sentiment, Growth, and Stability for TGT.
WMT shares were trading at $135.35 per share on Friday afternoon, down $0.73 (-0.54%). Year-to-date, WMT has declined -6.46%, versus a -7.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet's keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet's looks to help retail investors understand the underlying factors before making investment decisions.
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