3 Dividend Diamonds Offering Stability and Growth

Stocks to buy

Dividend stocks cater to investors who want less volatility and stable cash flow. Some dividend stocks offer a combination of respectable yields and solid growth, but most investors lean more toward one or the other.

High-yield dividend stocks offer more cash flow at the moment but typically get outperformed by the market. However, the losses tend to be lower during corrections. Growth dividend stocks are more volatile and have lower yields but can keep up with the market and even outperform it in some cases.

Investors looking to diversify their portfolios may want to consider these dividend-growth stocks.

Walmart (WMT)

The retailer has been a staple in the American economy for over 60 years. Many investors use Walmart (NYSE:WMT) as a bellwether to gauge the strength of U.S. consumers. The company offers various goods and services with a healthy blend of discretionary items and essentials like groceries.

Walmart stock has been a steady performer. Shares are up by 16% over the past year and have gained 79% over the past five years. The company’s growing e-commerce business can fuel more gains in the future.

The e-commerce segment grew by 15% year-over-year (YoY) in the third quarter of fiscal 2024. That growth helped the company achieve 5.2% YoY revenue growth across all operations. The company also raised sales and adjusted EPS guidance for fiscal 2024.

Advertising is another segment for investors to monitor due to higher profit margins and growth. Walmart delivered 20% YoY growth in its advertising revenue.

Walmart is achieving higher growth rates from international markets. That opportunity can help the company continue to deliver good earnings reports.

Toyota Motors (TM)

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Toyota Motors (NYSE:TM) has been producing automobiles since 1937. The company now produces over 10 million vehicles and achieved record sales in 2023. A household name doesn’t always make for the best stock, but Toyota is one of the many exceptions to this rule.

Shares have gained 37% over the past year and are up by 65% over the past five years. Shares currently trade at a 10 P/E ratio and have a 2% dividend yield.

The company delivered good financials for the first half of fiscal 2024. Revenue has jumped by 24.1% YoY during this stretch. Revenue growth is an acceleration from the 14.4% YoY revenue growth reported in the first half of fiscal 2023. The company’s profit margin has been in the low double-digits over the past two quarters.

Toyota has immense brand recognition, delivers respectable profit margins for an automobile company and has a good dividend. The company has endured various economic cycles and has the elements of a stable dividend stock.

American Water Works (AWK)

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American Water Works (NYSE:AWK) is a water utility company that offers water and wastewater services in the United States. The company has been around since 1886 and has navigated many economic challenges. AWK offers a vital service that generates cash flow giving it stability and respectable dividend payouts.

American Water Works serves 14 million people with regulated operations in 14 states and 18 military operations. The utility company recently reported 8% YoY revenue growth and 9% YoY net income growth in the third quarter of 2023.

Shares are down by 21% over the past year and have gained 32% over the past five years. American Water Works isn’t the type of stock to beat the market. However, it’s the type of stock dividend investors may accumulate due to its stability. Long-term dividend investors may want to accumulate shares on the dip.

AWK stock trades at a 26 P/E ratio and offers a 2.30% dividend yield. Annual dividend growth is solid and came in at an 8% YoY improvement in 2023. That fulfills management’s expectation of a 7% to 9% long-term compounded annual growth rate for the dividend. The company is expected to announce a dividend hike near the end of April.

On the date of publication, Marc Guberti did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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