The stock market and risk go hand-in-hand. While growth stocks provide excellent opportunities to earn substantial profits over the long run, they are best suited for investors with a high-risk tolerance.
Meanwhile, dividend stocks serve as a relative safe haven, generating consistent passive income. Dividend stocks, particularly those that have consistently raised and increased dividends, are more appealing to income investors. Here are two dividend stocks that investors can trust and hold for over a decade.
Dividend Stock No 1: Lowe’s Companies
Lowe’s Companies (LOW) is a leading player in the home improvement retail sector, known for its diverse product line that includes everything from building materials to appliances. It is the second-largest home improvement retailer in the United States, with 1,746 stores.
Valued at $136.9 billion, LOW stock has gained 12.4% YTD, compared to the S&P 500 Index's ($SPX) gain of 18.1%.
The home improvement industry has grown significantly in recent years, owing to a tight housing market, increased homeownership, and the rise of DIY culture. Lowe's has benefited from these trends by expanding its product offerings and improving its online presence. Its earnings have increased from $5.49 per share in 2020 to $13.20 per share in 2024, reflecting the stability of its earnings.
Lowe's has increased its dividend for 53 consecutive years. This also earned the company the title of Dividend King. Dividend Kings are a group of companies that have increased dividends for over 50 years in a row.
Lowe's has an attractive forward yield of 1.9%, compared to the consumer discretionary sector average of 1.89%. Furthermore, the forward dividend payout ratio of 35.9% indicates that the company's earnings can support current dividend payments while still allowing for future growth.
In the second quarter of fiscal 2024, earnings dipped to $4.17 per share, compared to $4.56 per share, due to the challenging macroeconomic environment. Nonetheless, Lowe’s paid out $629 million in dividends and repurchased $1.0 billion worth of shares in the quarter.
Due to lower-than-expected DIY sales and a pressured macroeconomic environment, management anticipates adjusted EPS in the range of $11.70 and $11.90 per share in fiscal 2024, compared to $13.20 per share in fiscal 2023. Management believes that the company's efficient and disciplined capital program will help it deliver long-term shareholder value.
Likewise, analysts expect Lowe’s earnings to dip by 10.5% for the full year 2024 before rising by 8.6% in 2025.
Overall, Wall Street has rated LOW stock a “moderate buy.” Out of 24 analysts covering the stock, 15 have a “strong buy” rating, one has a “moderate buy” rating, and 14 have a “hold” rating. Analysts have an average target price of $247.13 for LOW, which it has already surpassed. However, the Street-high target of $280 indicates upside potential of about 12%.
Dividend Stock No 2: Walmart
Walmart (WMT) is the world’s largest retailer, operating more than 10,500 stores across 19 countries. Its massive scale gives it significant bargaining power with suppliers, enabling it to offer competitive prices. This scale, combined with a robust supply chain and efficient operations, allows Walmart to maintain a leadership position in the retail sector.
Jim Cramer, host of CNBC's Mad Money, recently stated that Walmart is likely to join the $1 trillion market capitalization club soon, thanks to its strong loyalty programs and e-commerce initiatives.
Valued at a market cap of $607.9 billion, WMT stock is up 44% YTD, outpacing the broader market.
Its network of hypermarkets, supermarkets, and membership-only warehouse clubs has helped shape the company's current identity.
Furthermore, by increasing dividends over the last 51 years, Walmart has earned the title of Dividend King. It recently raised its dividend by 9%, marking the 51st consecutive year of increases. Walmart has a forward dividend yield of 1.1%, compared to the consumer staples average of 1.8%. Its forward payout ratio of 30.5% suggests that the company can maintain current dividend payments while also allowing for dividend growth.
The consistency of dividend payments reflects Walmart's strong fundamentals. In the company's most recent second quarter of fiscal 2025, revenue increased 4.8% to $169.3 billion, while adjusted earnings increased 9.8% to $0.67 per share.
Walmart has been focusing on several strategic initiatives to maintain its growth trajectory. This includes working with Symbotic (SYM) to automate the supply chain process and its plans to acquire Vizio's SmartCast Operating System (OS) to connect with its customers.
Walmart's future looks bright, thanks to its strong market position, strategic initiatives, and ability to adapt to changing consumer behaviors. This means increasing earnings, making it a dependable income stock for long-term investors.
While focusing on expansion, Walmart has kept its debt-to-equity ratio low, at 0.44, allowing it to return value to shareholders through dividends. Analysts predict that Walmart's earnings will rise steadily over the next two years, with 10.3% growth expected in fiscal 2025 and 10.7% in fiscal 2026.
Overall, Wall Street rates Walmart stock as a “strong buy.” Out of the 24 analysts covering WMT, 24 have a “strong buy” recommendation, four rate it a “moderate buy,” and three suggest it’s a “hold.” Its average price target of $78.07 suggests an upside potential of 3.1% from current levels. However, its Street-high estimate of $85 implies a potential upside of about 12.3% in the next 12 months.
