This Dividend King Is on Track to Join the $1 Trillion Club. Is It a Buy?

At first glance, the idea of a Dividend King approaching a $1 trillion market cap might surprise investors. This category of stocks tends to prioritize their ability to hike their payout every year and typically grows at a slower pace, making them excellent choices for conservative or income investors.

Therefore, it might surprise investors when they learn that Walmart's (NYSE: WMT) market cap is about $850 billion, meaning it will reach the $1 trillion mark if it grows by another 18%. Knowing that, investors might wonder whether that makes Walmart stock a buy or if they should pursue other investment opportunities.

The state of Walmart

Walmart is a Dividend King by virtue of introducing a dividend in March 1974 and subsequently hiking the payout every year since that time.

At the time it introduced its dividend, Walmart operated department stores in smaller towns in its home state of Arkansas and surrounding states. Eventually, the company grew to become the world's largest retailer, claiming just under 11,000 locations globally and operating e-commerce sites in 19 countries.

That expansion fueled its stock price during that time and funded dividend increases in the subsequent 52-year history as a dividend payer.

Despite its growth, Walmart is not resting on its laurels. Its latest initiative is a partnership with privately held OpenAI to incorporate artificial intelligence (AI) into its sales process.

This adds features such as Instant Checkout. Thus, instead of scrolling through a long list of results, Walmart wants to understand its customers to direct them to desired results that make the shopping experience more personal and enjoyable.

That builds on its longtime approach of prioritizing low prices and capitalizing on its extensive store footprint to offer omnichannel retailing, something that gives it a competitive edge over Amazon and e-retailers in general.

To facilitate such improvements, Walmart has spent more than $11.4 billion in capital expenditures (capex) in the first half of 2025 alone. It used this money to improve its supply chain and efforts to improve the customer experience.

Moreover, efforts in digital advertising and Walmart+ memberships tend to benefit from higher net profit margins. These give it avenues for growth outside of retailing, which is typically a lower-margin enterprise.

What the numbers say

Unfortunately, the company faces some headwinds in its journey to $1 trillion despite the investments in its business.

Walmart generated more than $343 billion in revenue in the first six months of fiscal 2026 (ended July 31), a 4% increase compared to year-ago levels.

Still, operating expenses have risen faster than revenue. Although it reported a 20% increase in net income to $11.5 billion, that masked a 2% decrease in operating income. Walmart's improvement only came from non-operating items related to investments, which tend to be one-time events.

Indeed, investors seem to have dismissed such results as the stock has risen by more than 30% over the last year.

Nonetheless, even with the Dividend King status, its annual payout of $0.94 per share amounts to a dividend yield of less than 0.9%. Since the S&P 500 average is 1.2%, the dividend is probably only attractive to longer-term shareholders.

Moreover, its P/E ratio has risen to 40, well above its five-year average of 34. That is likely not high enough to prompt current shareholders to sell, but it makes its valuation a headwind that could hurt the stock's near term performance.

Should you buy Walmart stock?

At this time, Walmart stock is likely a hold.

Walmart's willingness to invest in technology and improved customer experiences should bode well for the company. Also, its moves into higher-margin businesses such as advertising and subscriptions could boost its growth over time.

However, its modest dividend may negate the appeal of its Dividend King status. With a dividend yield well under the S&P 500 average, the payout is unlikely to attract many new investors.

Additionally, between the recent rise in the stock price and Walmart's higher P/E ratio, its strengths are likely priced into the stock. Although the company will likely reach the $1 trillion market cap eventually, the stock's headwinds could point to short- and medium-term challenges in achieving that milestone.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.