It doesn't take a huge sum of money to get started in the stock market. Many investors even like to build up their positions over time -- for example, by buying in thirds. That way you can spread out your purchases and minimize the risk of buying at a market top.
Dividend stocks are excellent candidates for a starter position of $1,000 or less. They tend to be stable businesses that can grow earnings through a wide range of selling environments. And you'll immediately benefit from the income that arrives through those steady quarterly payouts. Elect to have those dividends automatically reinvested, meanwhile, and you can amplify your returns by accumulating more shares over the years.
Home Depot (HD 0.94%) and Walmart (WMT -0.08%) are great options for fans of passive income who are looking to put some cash to work in the stock market right now. Let's look at some excellent reasons to buy these top dividend giants.
Home Depot has a good yield
You'll generally do well by owning successful market leaders, and Home Depot certainly fits that bill. The home improvement giant dominates its industry, as illustrated by the fact that its growth and profit margins are well above those of its peers. Home Depot posted a modest 4% comparable-store sales decline last quarter compared to the 6% slump at Lowe's (LOW -0.04%). The chain's profit margin, at 14% of sales, routinely beats its smaller rival, too.
Home Depot is calling for another year of slightly lower sales in 2024. Do-it-yourself shoppers are spending less cash on home improvement projects and the housing market has slowed due to rising interest rates. Yet the chain has thrived through many cyclical downturns in the past and has always gone on to set new sales and earnings records.
Putting $500 into the stock right now would yield about $12 in annual passive income. But shareholders can count on that payout rising over the years -- even following its generous 8% hike in early 2024.
Walmart is stable
Walmart is starting to shed its reputation of being just a stodgy dividend stock. The retailer recently announced accelerating sales growth for the fourth-quarter holiday shopping period, anchored by rising customer traffic. Its focus on price leadership is paying off at a time when people are looking for savings on groceries and other essentials. Walmart gained market share in these critical niches in Q4, management revealed in late February. "Our team delivered a great quarter," CEO Doug McMillon said.
The company backed up those positive comments with a bigger cash return commitment. Walmart hiked its dividend by 9% this past quarter, or about four times last year's increase.
It's not hard to see why the retailer is more financially flush these days. Besides the faster sales growth, profit margins are rising thanks to lower costs and strong expansion in areas like digital advertising sales.
These wins aren't going to make Walmart perform like a tech-focused growth stock. It's still a highly mature business, after all. However, you'll get stable sales and earnings generation from this global retailer, without much of a risk of a recession tanking its results. In the meantime, you can sit back and collect income from a dividend that has risen for over 50 consecutive years.
