The 2021 stock market rally hasn't been kind to every successful business. While financial and tech stocks dominate the return rankings through mid-July, Wall Street left many blue chip companies out of this year's surge.
The good news for income investors is that this underperformance translates into higher dividend yields. So, let's look at whether a few of the Dow's worst-performing members so far in 2021 -- Walmart (WMT -0.87%), Verizon Communications (VZ 0.65%), and Procter & Gamble (PG -0.56%) -- might offer compelling value today.
Walmart is a value
There's no shortage of reasons to like Walmart stock right now. The world's leading retailer just booked an amazing fiscal year that saw it add $40 billion of revenue to its base. Sure, growth will slow in the wake of the pandemic that pushed spending into areas like groceries and home supplies. But CEO Doug McMillon and his team just raised their outlook for the current fiscal year following strong demand across the retailing aisles.
Wall Street is worried about elevated costs over the next few years as Walmart invests in its e-commerce platform and works to hold on to all the new customers it attracted through the pandemic. Those initiatives might pressure earnings and reduce direct shareholder returns like stock buybacks. But they're a down payment on future growth, too. And they'll help ensure Walmart continues to dominate its industry just as it has through a wide range of selling environments in the last few decades.
Verizon Communications is a Buffett favorite
Wall Street has left Verizon out of this rally in favor of tech giants like Microsoft and Cisco Systems. But there's a lot to recommend this communications network stock.
Start with its over 4% yield, which is likely one big reason billionaires like Warren Buffett have been accumulating shares. That meaty payout is well covered by a huge base of recurring revenue. Verizon recently reported accelerating sales growth and affirmed its bullish outlook for 2021.
Sure, the expected 4% sales uptick this year looks meager compared to some of the sales numbers being generated by tech companies like Apple. But Verizon's 5G push is laying the groundwork for many more years of user growth across its network. And that generous payout is well covered by earnings and cash flow.
Procter & Gamble keeps winning
Procter & Gamble isn't getting enough appreciation on Wall Street. The consumer staples giant proved in its April earnings report that it can keep growing as consumers return to more-normal spending patterns. Organic sales rose 4% as P&G gained market share in attractive global categories like beauty products and laundry care.
P&G faces a challenge in raising prices to account for surging input costs in recent months. But executives are projecting another strong year for sales, earnings, and cash generation even as sales growth slows compared to 2020's surge.
And dividend fans have every reason to love this stock. P&G's 2021 dividend increase marked its 65th consecutive year of raises -- and it was a massive 10% spike to boot. Holding stocks with these types of financial and competitive assets tends to pay off over the long term. And that's even more true when you can buy a stock like P&G at a relative discount compared to the rest of the market.