S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
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Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Critical asset just had biggest fall on record (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Tech insider: "Watch your mailbox" (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
Wall Street Pushing a 'Crypto Revolution' - Will You Miss Out… AGAIN? (Ad)
Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Critical asset just had biggest fall on record (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Tech insider: "Watch your mailbox" (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
Wall Street Pushing a 'Crypto Revolution' - Will You Miss Out… AGAIN? (Ad)
Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Critical asset just had biggest fall on record (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Tech insider: "Watch your mailbox" (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024
S&P 500   5,088.80
DOW   39,131.53
QQQ   436.78
Dell Technologies breaks out ahead of earnings release
Wall Street Pushing a 'Crypto Revolution' - Will You Miss Out… AGAIN? (Ad)
Dropbox’s stock is a falling knife worth catching
Novavax’s dispute resolution and upcoming earnings call
Critical asset just had biggest fall on record (Ad)
Stock ideas from the 2024 Microcap Conference
Warner Bros. Discover: Debt down, profits up, yet questions remain
Tech insider: "Watch your mailbox" (Ad)
Gloom settles over Germany's economy, with businesses downbeat about the coming months
Sprouts, Block rise; Booking Holdings, Insulet fall, Friday, 2/23/2024

3 Winning Retail Stocks Income Investors Can Rely On

Retail Sales Puzzle Piece on red background

Key Points

  • Walmart is the leading retailer, still growing and outperforming estimates. 
  • Lowe's Companies is a Dividend King and offers value and above-average dividend growth. 
  • Off-price retailers like TJX Companies are hitting their stride, paying dividends, and buying back shares. 
  • 5 stocks we like better than Walmart

The Retail Sector (XRT) has always been a challenging one to invest in, but income investors can find attractive returns that build wealth. The takeaway from recent data is that consumer spending remains strong, albeit aided by inflation. Inflation is having an impact on spending habits more than volume, and that is where opportunities lie. The qualities that Walmart NYSE: WMT, Lowe's NYSE: LOW, and TJX Companies NYSE: TJX have in common include blue-chip status, outperformance, increased market share, reliable dividends and an ability to deliver value consistently, year after year when others can not. Qualities that make great investments in any sector. 

Walmart Is the Leading Player in Consumer Retail

Walmart proved in Q2 that size and scale matter. Walmart is the world's largest retailer and was able to grow, outperform consensus estimates, and take market share from its competitors because of it. The company can put more of what consumers want on the shelves, it's able to shift to categories where consumers are spending their money, and it has the best ties to the supply chain. It also has Sam’s Club to complement the core business, and both are doing well. While Walmart's core business is stealing share from Target NYSE: TGT, Sam's Club continues to grow membership and comps ex-fuel. 

Target presents a deep value and a high yield for investors that will probably pay off over the long term. The question is when the bottom will be hit, and TGT shares do not appear to be at the bottom now. While investors wait for that event, Walmart is trending higher, pays about 1.45% in yield and is repurchasing shares. The payout isn't attractive from the high-yield viewpoint but aligns with the broad market average and is growing. The company is a Dividend King with a payout ratio of 35% that says annual distribution increases will continue. Share repurchases added about 0.28% to the yield in Q2 and are also expected to continue. 

WMT stock chart

Lowe's  Company is a Better Buy Than Home Depot 

Lowe's Company trades at a discount to Home Depot NYSE: HD, which at first glance is surprising. A little digging shows that Home Depot pays out more of its earnings in dividends, which is a primary cause for the divergence in value. Home Depot also yields a little more, about 60 bps, with shares near late-August levels and another cause for divergence in value, but the distribution growth outlook offsets it. 

Home Depot is growing its dividend but has a marred history compared to Lowe's royal pedigree, and it isn't growing the distribution as quickly. Lowe's is running a much higher distribution CAGR than HD and can sustain higher increases for longer, a trend that will help boost the stock valuation over time. Regarding the recent results, Home Depot performed better in Q2 than the analysts' estimates but gave weaker guidance and a cloudier outlook. HD expects a weaker 2nd half, while Lowe's a better one

LOW stock chart

TJX Companies: Off-Price Gives Full Value To Investors 

Walmart is not the only retailer to gain share from Target this season. The off-price retailers, led by TJX Companies, are also taking share. TJX Companies outperformed the consensus estimates in Q2 and grew revenue on strength in home goods and apparel. Those are categories that Target and Walmart lost ground in and are driving strength across the off-price universe. 

Regarding the dividend, TJX doesn't have quite the history of sustained distribution growth you get with WMT and LOW, but it is impressive. Except for 1 year during the peak of the COVID-19 pandemic when the distribution was suspended, TJX has paid a distribution every quarter since May 1999. In the years it paid a dividend, it only ever increased the payment and made regular annual increases. No investor likes to have a distribution cut, but given the circumstances and TJX share price today, it was a good move, and long-term holders are probably happy.  

TJX stock chart

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Should you invest $1,000 in Walmart right now?

Before you consider Walmart, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Walmart wasn't on the list.

While Walmart currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Lowe's Companies (LOW)
4.2026 of 5 stars
$232.56+0.9%1.89%17.93Hold$241.54
TJX Companies (TJX)
4.1606 of 5 stars
$99.38+0.3%1.34%28.15Moderate Buy$100.44
Walmart (WMT)
4.566 of 5 stars
$175.56+0.1%0.47%30.59Moderate Buy$184.59
SPDR S&P Retail ETF (XRT)N/A$74.63+1.8%1.74%8.88N/AN/A
Home Depot (HD)
4.4376 of 5 stars
$371.98+0.2%2.25%24.63Moderate Buy$360.46
Target (TGT)
4.8239 of 5 stars
$151.48+0.8%2.90%19.32Hold$155.31
Ross Stores (ROST)
4.0251 of 5 stars
$148.03+0.8%0.91%29.31Moderate Buy$135.42
Kohl's (KSS)
2.527 of 5 stars
$27.52+0.5%7.27%-21.01Reduce$24.50
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

  • tmhughes.writeon@gmail.com

Contributing Author

Technical and Fundamental Analysis

Experience

Thomas Hughes has been a contributing writer for MarketBeat since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 


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