Despite the demise of many physical retailers in 2020, these three stocks have gained and can anchor your portfolio through any turmoil.
Dec. 29, 2020
These three companies have consistently grown for many years, regardless of market conditions such as the Great Recession in 2008. As a beginner investor, many people fear losing money or aren’t prepared for volatility. These large-cap stocks help to reduce volatility in a portfolio as the stock price is unlikely to fluctuate wildly. These stocks will anchor your portfolio, and as a bonus, all three pay a dividend.
Walmart (NYSE: WMT) is the largest brick and mortar retailer in the U.S. and opened almost six decades ago, priding itself on low prices. It has now grown to over 11,500 stores in 27 countries worldwide. Walmart was founded by the Walton family, who still own a significant ownership stake in the company.
Despite increasing competition from e-commerce giant Amazon (NASDAQ: AMZN) in recent years, Walmart has continued to grow. It has partnered with Shopify (NYSE: SHOP) to allow third-party merchants to sell on its site and invested heavily in R&D. This appears to be paying off, and in Q3 of fiscal 2021, it reported 79% growth in e-commerce sales. It also launched Walmart+ a membership offering with benefits such as free delivery for a monthly subscription fee and will compete with Amazon Prime.
Walmart had another strong quarter with Q3 revenue coming in at $134.7 billion, an increase of 5.2% from the year prior, and comparable-store sales grew by 6.4%. Walmart also pays a quarterly dividend and has consistently raised it since first paying one back in 1974. Currently, its dividend yield is approximately 1.44%.
Walmart has also offloaded its Argentina business and sold its majority stake in U.K. retailer Asda along with its Japanese subsidiary. It is doubling down on e-commerce and prioritizing markets such as India and Mexico through strategic partnerships. Walmart is also exploring opportunities in health and wellness and telehealth, opening three new health centers in the quarter, which is another avenue for growth.
2. Home Depot
The Home Depot (NYSE: HD) is the largest home improvement company in the world with more than 2,200 stores in the U.S., Canada, and Mexico. The company has been a beneficiary of COVID-19 as people have spent more time at home and turned to home improvement.
Earlier this year Home Depot reported record Q2 results and this “exceptional” performance has continued into Q3. Total revenue for Q3 came in at $33.5 billion, an increase of 23% year-over-year (YoY). Same-store-sales increased by an impressive 24% in the quarter with the top 40 markets posting double-digit growth in this area. It also reported a net income of $3.4 billion and paid its quarterly dividend.
Home Depot avoids competition from Amazon and other online retailers due to the nature of the products that it primarily sells. The costs of shipping have helped Costco to fend off competition from Amazon. However, it is leveraging its digital platforms with digital sales increasing by 80% YoY, but the majority of products are picked up in-store. It continues to invest through its “One Home Depot” strategic plan to implement improved e-commerce solutions along with curbside pickup.
Home Depot also agreed to acquire HD Supply which is a leading national distributor of maintenance, repair, and operations. This expands Home Depot’s footprint in the $55 billion markets. The future looks brighter than ever for this retailer.
Costco (NASDAQ: COST) operates a membership-only warehouse club selling a wide range of products often in bulk. It was founded in 1976 in a converted airplane hangar and with a dedication to low prices. It has had an excellent year to date with people stocking up on essentials.
Costco’s business model differs from other retailers due to its subscription model, which costs $60 for a basic membership and $120 for an executive one. It typically makes very little on the products it sells due to low margins but more than makes up for it with subscription revenue. It currently has 58 million members globally, and this continues to rise.
In fiscal Q4, Costco’s net sales increased by 12.5% to $52.2 billion, and net income in fiscal Q4 was $1.39 billion and has steadily increased over the years. The company has a rock-solid balance sheet with $12 billion in cash in Q4. It also announced a special dividend of $10 per share, the fourth such dividend in the last eight years. In this timeframe taking these regular and special dividends into account, the stock has risen over 300%, which is impressive for an anchor stock.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.