Investors often gravitate toward super safe dividend stocks to collect passive income and limit market volatility. But sometimes, even stodgy, boring companies can crush the market.
In the past six months (from May 29 to Nov. 29) Walmart (NYSE: WMT) is up a staggering 42.5%, Clorox (NYSE: CLX) is up 30.4%, and Kenvue (NYSE: KVUE) is up 27.6%. Here's what's driving all three stocks higher and why they have what it takes to continue raising their dividends for years to come.
With discount retailers like Dollar General and Dollar Tree hovering around 52-week lows and Target falling over 22% in a single day after its last earnings report, you may think that Walmart stock would be lying in the bargain bin. But Walmart is up a mind numbing 72% year to date.
When an established retailer like Walmart gains a big amount in a short period of time, it's usually because the company is doing something completely unexpected. Walmart has threaded the seemingly impossible needle of conveying everyday value for consumers while also attracting higher-income consumers.
In its recent quarter, Walmart said that its U.S. business delivered 5.3% comparable sales growth with notable market share gains in grocery and general merchandise. For the quarter, around 75% of market share gains in Walmart U.S. came from households earning more than $100,000.
So by delivering everyday value, Walmart has attracted consumers toward its discretionary goods during a period when so many retailers are struggling. It's not just pricing where Walmart is shining. Walmart's services, such as Walmart+ contactless delivery service, Walmart Marketplace (business-to-business e-commerce tools), and Walmart Connect (tools for sellers) are all thriving.
To top it all off, Walmart is using artificial intelligence and machine learning to gain customer insights and improve the in-store experience, digital offerings, and its internal processes.
Walmart is in a league of its own, but the stock has become significantly more expensive, and the yield has fallen to just 1%. However, Walmart is a Dividend King with 51 consecutive years of dividend raises. In February, Walmart raised its dividend by 9%, and I would expect a double-digit-percentage raise this coming February.
Add it all up, and Walmart could still be worth a closer look for investors who don't mind a lower yield.
With 40 consecutive years of dividend raises and a 2.9% yield, Clorox immediately stands out as a passive income powerhouse. But unlike Walmart, Clorox isn't at the top of its game -- far from it right now.
On Oct. 30, Clorox reported first-quarter fiscal 2025 results. It raised its full-year fiscal 2025 earnings guidance but reaffirmed organic sales growth of just 3% to 5%. Clorox continues to spend a ton on advertising, which ate into earnings for the recent quarter.
Given the challenges, investors may wonder why the stock hit an all-time high. The simple answer is that Wall Street cares more about where a company is going than where it has been. And there are plenty of reasons to believe Clorox is headed in the right direction.
The last few years have been a mess for Clorox. There was the pandemic, which initially was a boon for Clorox as customers flocked to cleaning products. But Clorox overestimated demand trends, believing there would be a sustained shift in buyer behavior toward more hygiene and cleaning. That left Clorox overextended when pandemic restrictions eased.
And to make matters worse, Clorox was hit by a cyberattack in 2023. Its first-quarter fiscal 2024 sales fell 20%, and diluted earnings per share slumped 75%. So given all these challenges, fiscal 2025 is truly the first "normal year" we've seen from Clorox for some time.
It's also worth mentioning that Clorox's stock price is up just 12.8% over the last five years. So the recent surge may partially be the market catching up to the fact that Clorox is returning to growth.
Clorox still has a way to go before returning to its high-margin form. However, the stock could still be worth buying for patient investors looking for higher-yield options in the consumer staples sector.
In August 2023, Johnson & Johnson spun off its low-growth consumer health division so it could focus on its pharmaceutical and medical device business segments. The resulting company, Kenvue, was named after "ken" -- meaning knowledge -- and "vue" -- meaning sight -- to showcase the company's insight into personal health solutions.
The spinoff provided greater insight into the performance of legacy brands like Aveeno, Band-Aid, Listerine, Neutrogena, and Tylenol. As is the case with most spinoffs, the market needed time to adjust to Kenvue. Even after its recent run-up, Kenvue is down 10.5% since its inception after undergoing an initial sell-off in late 2023, followed by an additional tumble over this past summer.
Kenvue is far from a high-octane growth machine. But it is an ultra-stable company that should be able to grow its dividend over time steadily. Kenvue is technically a Dividend King because it inherited J&J's status. But Kenvue's recent dividend raise was just 2.5%. Kenvue needs to deliver larger raises to be considered a passive income powerhouse. But the good news is that Kenvue already has a sizable yield of 3.4% and a reasonable forward P/E ratio of 21.1.
Risk-averse investors focused more on capital preservation than capital appreciation may want to look closer at this high-yield value stock.
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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kenvue, Target, and Walmart. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $13 calls on Kenvue. The Motley Fool has a disclosure policy.