The stock market's impressive performance in 2023, with a staggering 24% return for the S&P 500 Index ($SPX), might have defied expectations - but stocks are still on the rise in 2024, and many of the top performers have been mega-cap stocks. Those are the big guns with market caps over $200 billion, and these household names tend to be very well-represented in benchmark equity indexes like the S&P 500 and the Nasdaq-100 Index ($IUXX).
Some market watchers have grown skeptical about how much upside is left for some of these outperforming mega-caps, and it's a fair question, particularly as former market leaders like Apple (AAPL) and Nvidia (NVDA) have already corrected off their highs. But with today's hot inflation data crushing investors' 2024 rate-cut hopes, it's worth pointing out that some mega-cap stocks offer a measure of safe-haven appeal, too. Many of these companies are still growing, despite already being deeply embedded in the global economy - and some of them offer pretty steady dividend payments, too.
Among the standout mega-cap stocks that look poised for further growth are Novo Nordisk (NVO), Walmart (WMT), and Oracle (ORCL). These titans boast massive market capitalizations, healthy cash flows, and a proven track record of dividend growth. Plus, they're all analyst favorites, too, with more upside expected from the pros on Wall Street. Here are the key highlights for investors.
Mega-Cap #1: Novo Nordisk
Novo Nordisk (NVO) is a global healthcare company that's been leading the diabetes care market with its innovative biopharmaceutical products (surely you've heard of Ozempic by now). They've got a diverse portfolio that caters to patients with diabetes, obesity, and other chronic diseases, providing more effective and convenient options for patients worldwide. With a massive market cap of $560.3 billion, this Danish company is definitely a big player in the European stock market and the pharma world.
Their stock has been performing well, up 57% over the past 52 weeks to easily outperform the broader market. Year-to-date, NVO has gained more than 20% - even though the stock is down 9.6% from its early March highs, providing a potential dip-buying opportunity after a gap higher in the share price.
Financially, Novo Nordisk's been delivering solid results thanks to its blockbuster diabetes and weight-loss drugs, Ozempic and Wegovy. In Q4 2023, they reported earnings per share (EPS) of $0.71, which beat estimates of $0.66. They also reported stronger-than-forecast sales of $9.50 billion for the quarter, and closed Q4 with a cash position of over $2 billion.
Looking ahead, analysts expect earnings growth of nearly 23% this fiscal year.
Novo Nordisk pays a semiannual dividend of $0.93 per share, which yields 1.49% at current levels. The pharma giant has now raised its dividend for four consecutive years, and the payout ratio around 50% indicates the dividend is well covered by earnings.
As competition heats up, Novo Nordisk isn't just sitting back and enjoying their success. They're making big moves, like acquiring Cardior Pharmaceuticals to strengthen their position in developing RNA-targeted therapies for cardiac dysfunctions. Plus, they’ve partnered with Omega Therapeutics and Cellarity to explore new treatments for obesity and liver diseases.
Analysts are totally digging Novo Nordisk, with 8 out of 12 suggesting a “strong buy,” 1 recommending a “moderate buy,” 2 suggesting a “hold,” and 1 opting for a “moderate sell.” The average price target is $147.25, which means the stock could potentially rise by around 17.8% from current levels.
Mega-Cap #2: Walmart
Walmart (WMT) has been a go-to spot for shoppers around the world, thanks to its massive network of stores and online platform. The company's focus on keeping prices low, staying innovative, and putting customers first has helped it stay ahead.
Over the past year, WMT stock has been holding its own, up 20.8%. In 2024 so far, the shares are 15.4% higher.
With a market cap of over $481 billion, Walmart's proven it can stay profitable even when times are tough, and its solid financial position has allowed it to increase its dividend for 50 years straight. That's earned Walmart the title of Dividend Aristocrat. The most recent quarterly dividend was $0.21 per share, with an annual yield of 1.39% based on the current stock price.
WMT has a payout ratio around 34% and ended the fourth quarter with over $9.9 billion in cash, suggesting these shareholder payments should keep flowing.
The retailer's Q4 2024 earnings report beat Wall Street's expectations, with adjusted EPS of $0.60 edging out the $0.55 consensus. Revenue of $171.91 billion also came in strong. Looking ahead, analysts are expecting Walmart to grow EPS by 6% in the current fiscal year.
But that's not all – Walmart's been busy with some strategic initiatives to drive growth. They've teamed up with unspun to use 3D weaving technology, which could revolutionize the apparel industry by reducing environmental impact and bringing textile manufacturing back to the U.S. Plus, they acquired VIZIO for around $2.3 billion to boost the growth of Walmart Connect through VIZIO’s SmartCast operating system, enhancing their media business and advertising capabilities.
Analysts are generally voting “strong buy” on Walmart, with 20 out of 29 analysts giving the stock their highest rating. Four more call the stock a “moderate buy,” and 5 recommend a “hold.” The mean target price for the stock is $64.97, representing an upside potential of approximately 7.2% from current levels.
Mega-Cap #3: Oracle
Valued at $338 billion by market cap, Oracle (ORCL) has been making waves in the cloud computing scene, using their enterprise software know-how to drive innovation and growth. As more businesses hop on the digital transformation bandwagon, Oracle's cloud services like IaaS and SaaS have become must-haves for organizations looking to scale, streamline, and stay competitive.
The stock's been on a roll, too, hitting new 52-week highs above $132 last month before paring gains. ORCL is up nearly 30% in the last year, including a 15.5% gain so far in 2024.
The software giant's fiscal 2024 Q3 results were released last month, and the bottom line beat expectations. Non-GAAP EPS jumped 16% to $1.41, while total revenue rose 7% to $13.3 billion, roughly in line with estimates. For the full year ending in May, Wall Street is targeting 9.6% EPS growth, followed by 12.1% growth expected for fiscal year 2025.
And let's not forget about those dividends – Oracle pays investors $0.40 per share on a quarterly basis, which translates to an annual dividend yield of 1.60%. That's backed by 9 years of steady dividend growth, and a cash position of about $9.5 billion at the end of fiscal Q3.
They've been busy with strategic moves, too. They've introduced an AI-powered cloud service to help banks fight money laundering more effectively. Plus, their partnership with Palantir (PLTR) to provide secure cloud and AI solutions shows they're serious about delivering top-notch tech.
Analysts are feeling pretty good about Oracle, too, with a “moderate buy” consensus based on ratings from 28 analysts. Sixteen of them are going for a “strong buy,” while 12 more say “hold.” The mean target price is set at $136.39, which means there's a potential upside of 12% from here.
Mega-Cap Dividend Stocks: Stability, Income, and Growth in a Single Package
In a nutshell, these mega-cap dividend stocks offer the “triple threat” of stability, income, and growth. Whether you're into Novo Nordisk's healthcare innovations, Walmart's retail resilience, or Oracle's cloud dominance, there's something for everyone. With their steady dividends, strong fundamentals, and thumbs-up from analysts, these big players are the MVPs of dividend investing.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
