Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Walmart Inc. WMT, The Home Depot, Inc. HD and Costco Wholesale Corp. COST.

Here are highlights from Thursday’s Analyst Blog:

3 Blue-Chip Retail Stocks Paving Your Investment Roadmap

When it comes to the stock market, investors often walk on a tightrope between risk and reward. While the allure of rapid gains can be tempting, it’s equally important to have a solid foundation of stable, long-term investments in your portfolio. Achieving this delicate equilibrium is the cornerstone of successful investing.

Rather than chasing high-risk, high-reward stocks that frequently grab headlines, investors should engage in a meticulous assessment of market dynamics and the formulation of a well-conceived investment strategy. Their focus should be on well-established companies with a track record of success and a demonstrated ability to weather economic downturns.

Hence, when it comes to long-term stability and consistent growth, market pundits place their bets on highly reputed companies with humongous market capitalization. These industry titans are commonly referred to as blue-chip companies. Blue-chip stocks exhibit financial resilience and boast an impressive history of delivering solid returns to their shareholders.

Blue-chip companies tend to be less vulnerable to sudden fluctuations in stock prices, rendering them a dependable choice for both seasoned and novice investors. Furthermore, for income-oriented investors, blue-chip companies reward shareholders with regular dividend payouts, further enhancing stability.

These blue-chip companies possess a winning combination of established market positions, strong brand recognition, loyal customer bases and extensive market penetration. Such traits provide these companies with a distinct competitive edge and help unlock new opportunities, thus making them investor favorite.

By investing in blue-chip stocks, investors can build a well-diversified portfolio. Here we have identified three stocks from the Retail – Wholesale sector — Walmart Inc., The Home Depot, Inc. and Costco Wholesale Corp. Thanks to successful business operations, these bellwethers have withstood multiple market gyrations and delivered returns to investors. These blue-chip stocks have balance sheet strength to tackle any untoward market volatility.

3 Prominent Picks

Walmart: Walmart, the omnichannel retail giant, has been diligently working to further strengthen its already formidable presence in the market. The company has embarked on a series of strategic e-commerce initiatives, encompassing acquisitions, partnerships and significant improvements in its delivery and payment systems.

Simultaneously, Walmart is committed to elevating its merchandise offerings, ensuring a diverse and appealing product assortment. Innovation extends to its supply chain, where the company is enhancing capacity and introducing cutting-edge solutions. Additionally, Walmart has ventured into new business realms with initiatives like Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+, and Walmart Fulfillment Services, showcasing its dedication to remaining at the forefront of retail innovation.

With a market cap of $442.9 billion as of Sep 13, 2023, Walmart has a long-term earnings growth expectation of 6.6%. This Zacks Rank #2 (Buy) stock has a trailing four-quarter earnings surprise of 11.6%, on average.

The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings suggests growth of 9.2% and 2.2%, respectively, from the year-ago reported numbers. The company pays out a quarterly dividend of 57 cents ($2.28 annualized) per share, giving a 1.4% yield at the current stock price. WMT’s payout ratio is 35, with a five-year dividend growth rate of 1.9%. (Check WMT’s dividend history here)

Home Depot: Headquartered in Atlanta, GA, this company stands as another distinguished blue-chip stock, dominating the home improvement retail sector. With a steadfast commitment to its ‘One Home Depot’ plan, the company has consistently reaped the rewards of its strategic investments. The sustained growth in both the Professional and Do-It-Yourself categories, coupled with impressive digital momentum, has emerged as the driving force behind its success. The company’s interconnected retail strategy and robust technological infrastructure have amplified web traffic, leading to growth in digital sales.

With a market cap of more than $325.9 billion, Home Depot has a long-term earnings growth expectation of 9.5%. This Zacks Rank #3 (Hold) stock has a trailing four-quarter earnings surprise of 2.2%, on average. The company pays out a quarterly dividend of $2.09 ($8.36 annualized) per share, giving a 2.6% yield at the current stock price. HD’s payout ratio is 52, with a five-year dividend growth rate of 14.5%.

Costco: A consumer defensive stock, Costco has been surviving the market turmoil pretty well. Strategic investments, a customer-centric approach, merchandise initiatives and an emphasis on memberships have been the discount retailer’s primary strengths. Costco’s distinctive membership business model and pricing power set it apart from traditional players. Through a calculated approach that involves identifying untapped markets and tailoring offerings to meet customer preferences, Costco has managed to deepen its roots.

With a market cap of $248.1 billion, Costco has a long-term earnings growth expectation of 8.8%. This Zacks Rank #3 stock has a trailing four-quarter earnings surprise of 1.8%, on average.

The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS suggests growth of 6.7% and 9.5%, respectively, from the year-ago period. The company pays out a quarterly dividend of $1.02 ($4.08 annualized) per share, giving a 0.7% yield at the current stock price. COST’s payout ratio is 29, with a five-year dividend growth rate of 12%.
Walmart Inc. (WMT): Free Stock Analysis Report

The Home Depot, Inc. (HD): Free Stock Analysis Report

Costco Wholesale Corporation (COST): Free Stock Analysis Report

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Zacks Investment Research

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