3 Reasons to Buy and Hold This Dividend King (and 1 Reason Not To)

As the clichéd warning goes, "past performance is no guarantee of future results." Nevertheless, past performance is usually a pretty good indication of what the future likely holds.

To this end, while continued dividend growth is never guaranteed, once a stock's achieved the title of Dividend King by virtue of at least 50 consecutive years of annual dividend increases, it's clear the underlying company's got some serious staying power.

And there's one such name right now that's a particularly compelling prospect, and not just for its dividend pedigree. That company is brick-and-mortar retailing titan Walmart (NASDAQ: WMT). Here are the top three reasons to buy it right now with plans on holding onto it indefinitely, and one ironic reason not to.

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Walmart's already proven it's got plenty of muscle

With 53 consecutive annual dividend increases under its belt, Walmart's got nothing left to prove in terms of being a reliable dividend payer and grower.

This uninterrupted streak proves much more than the fact that the company can support an ever-rising dividend, though. It's ultimately an indication that Walmart knows how to win at the retailing game and, perhaps more importantly, keep its competitors in check. For perspective, with a total of 5,215 locations in the United States alone -- up from just one as of 1962 -- Walmart dwarfs its next-biggest direct competitors Target and Kroger, which operate just under 2,000 and nearly 2,800 stores, respectively. Clearly, it's doing something right.

Its dominant presence can be leveraged in many ways

That being said, it's difficult to deny the United States' brick-and-mortar retailing arena is getting rather crowded.

Although the company's got room to expand its footprint outside the United States, that's not exactly the case within the all-important U.S. market. It's closed a handful of its domestic stores since 2024, in fact, as part of a more sweeping footprint optimization effort.

This doesn't mean its long growth streak is over, however. Not by a long shot. This physical footprint can be leveraged in lots of other ways that produce meaningful growth. For instance, its e-commerce arm experienced year-over-year revenue growth of 26% last quarter, led by store-fulfilled pickup and delivery. That's more growth than online rival Amazon mustered for the same time frame. In this same vein, Walmart.com's high-margin advertising revenue improved 37% last quarter, as merchants and vendors increasingly look to support sales of their product through the retailer's online shopping platform.

The stock's down for no good reason

Finally, buy and hold this Dividend King right now because the stock's still down 16% from May's peak for no good reason.

Sure, there's a reason -- a handful of them, actually. One of them is last quarter's heavy capital spending that crimped free cash flow. Another is this concern from CEO John Furner: "When I look at the consumer, especially here in the U.S., they're telling us, they're feeling some pressure, and they're looking to Walmart for value" that they're not necessarily finding in its stores. Still another is the fact that Walmart didn't raise its full-year guidance when it reported its fiscal Q1 numbers in May. A handful of analyst downgrades and lowered price targets soon followed.

Just bear in mind that the retailer's been through all of these cyclical headwinds before, and has pushed through all of them. Also know that even though the company's not exactly performing as well as investors wish it were right now, the analyst community remains plenty bullish. Most of them still rate WMT stock as a strong buy, with a consensus price target of $139.84 -- about 25% above the ticker's recent price.

One reason not to buy Dividend King Walmart

With all of that being said, there is one ironic reason you might not want to buy a stake in this Dividend King today. That is, if you need to plug into a healthy dividend yield right now. With a forward-looking dividend yield of only 0.9%, Walmart stock just doesn't offer it, and probably won't in the immediate future.

Don't misunderstand. It still qualifies as a Dividend King due its track record of at least 50 years' worth of uninterrupted annual dividend increases. This title doesn't require a minimum yield, though, nor does it require a minimum pace of payment growth. For the time being, Walmart is mostly just a steady consumer staples name that also happens to pay a small dividend. Its stock repurchases are creating more shareholder value than its dividend payments.

Still, consider this: In a few years, the Walmart stake you buy today could be paying a much more meaningful dividend then. WMT stock's per-share quarterly dividend has improved by nearly 50% in just the past 10 years, for perspective, growing an average of about 4% per year. That's in addition to any capital growth that shares achieve in the meantime.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Target, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.