This Dividend King is set to join the trillion-dollar club. Is it a purchase?

There are currently eight publicly traded companies with a market capitalization of more than $1 trillion. nvidia, apologize, microsoft, alphabet, Amazon, meta platform, teslaand Berkshire Hathaway.

The stock is very popular, and for good reason. They made many investors rich. But none of them are particularly known as dividend stocks, and so far the trillion-dollar club has excluded long-term dividend stocks. But that could soon change.

walmart (WMT 2.32%)the world’s largest retailer and the world’s largest company by revenue, has quietly outperformed the rest of the retail sector in recent years, with its commitment to omnichannel selling and reputation for everyday low prices driving steady growth. Meanwhile, many of its peers are suffering from inflation and weak consumer spending.

Walmart reported another quarterly earnings report Tuesday morning. Top-line growth was strong overall, with comparable store sales (components) increasing 5.3% in U.S. stores (excluding fuel), marking our best performance in at least five quarters. And Sam’s Club, a members-only warehouse retail chain, reported comp growth of 7%, excluding fuel.

In the International segment, which has historically been a challenging segment for the company, constant currency revenue increased 12.4% to $30.3 billion. Overall, sales rose 5.5% to $169.6 billion, beating the consensus of $166.6 billion.

The retailer also achieved solid margin improvement, with gross margin up 21 basis points to 24.2%, driven by fewer markdowns in its U.S. stores and stronger inventory management. Operating profit also increased 8.2% to $6.7 billion, expanding overall operating margin. Adjusted earnings per share (EPS) increased from $0.51 to $0.58, beating the consensus of $0.53.

Walmart’s stores have performed well, but it’s also benefiting from emerging growth businesses like advertising. Sales increased 28% and global e-commerce remains strong, with sales up 27% as Amazon and other competitors gain market share.

The company also raised its guidance, boosting confidence for the holiday quarter. Net sales are now expected to increase 4.8% to 5.1% and annual adjusted EPS is expected to range from $2.42 to $2.47.

Image source: Getty Images.

Can Walmart Reach $1 Trillion?

Walmart’s market capitalization surpassed $700 billion for the first time on Tuesday, November 19, meaning the company is approaching $1 trillion. At current value, the stock only needs to grow 43%, which seems achievable considering recent momentum. The stock is currently up 66% year to date, but it will be difficult to repeat that performance next year.

The biggest risk for stocks at this point appears to be valuation. Based on this year’s EPS guidance, the stock trades for a price-to-earnings ratio of 35, which is well above most retailers and puts it in competition with tech giants that make up $1 trillion. Clubs like Microsoft and Apple.

Walmart earns that premium thanks to its recent execution and record of consistent growth and margin expansion. A decade ago, many thought the company would be overtaken by Amazon, but the company responded to the challenge by building an omnichannel business, capitalizing on new growth opportunities like advertising, and strengthening its competitive edge in areas like price and convenience.

As Walmart’s valuation has soared, its dividend yield has fallen to just 1%, but its track record of increasing dividends is unrivaled by any company in the trillion-dollar club. The company has raised its dividend every year for 51 consecutive years, becoming the Dividend King.

Is Walmart a buy?

Walmart’s third-quarter earnings report was virtually flawless, reminding investors that the company still enjoys some competitive advantages, such as economies of scale. Recession-proof business models focused on food and grocery; It offers growth opportunities in areas such as advertising and e-commerce.

The stock may look expensive at its current valuation, but the company has just proven its ability to grow even in a difficult environment. With a focus on general merchandise, the business appears poised to continue its steady growth toward a $1 trillion market capitalization. If you’re looking for a balance between growth and income, Walmart seems like a great fit.