3 Blue-Chip Retail Stocks to Navigate Changing Market Dynamics (2024)

When it comes to the stock market, investors often walk on a tightrope between risk and reward. While the allure of quick profits can be tempting, it is equally crucial to build a foundation of stable, long-term investments in your portfolio. This balance forms the core of successful investing, especially now, when there is speculation that the easing of monetary policy might be slower than initially expected.

Rather than chasing after high-risk, high-reward stocks that often make headlines, investors should meticulously assess market dynamics and develop a well-thought-out investment strategy. The emphasis should be on well-established companies with a proven track record and resilience to weather economic downturns.

For long-term stability and consistent growth, market experts incline toward highly reputable companies with substantial market capitalization, commonly known as blue-chip companies. These industry giants showcase financial resilience and have a history of delivering robust returns to shareholders.

Blue-chip companies are less susceptible to sudden stock price fluctuations, making them a reliable choice for both experienced and novice investors. Moreover, for those seeking regular income, blue-chip companies provide steady dividend payouts, adding to their stability.

These companies boast a winning combination of established market positions, strong brand recognition, loyal customer bases and extensive market penetration. These traits give them a distinct competitive advantage, making them favorites among investors and unlocking new opportunities for growth.

By investing in blue-chip stocks, investors can build a well-diversified portfolio. Here, we have identified three stocks from the Retail - Wholesale sector — Walmart Inc. WMT, The Home Depot, Inc. HD and Costco Wholesale Corporation COST. Thanks to successful business operations, these bellwethers have withstood multiple market gyrations and delivered returns to investors. These blue-chip stocks have balance sheet strength to tackle any untoward market volatility.

Walmart: The omnichannel retail giant, Walmart, has been diligently working to further strengthen its already formidable presence in the market. The company has embarked on a series of strategic e-commerce initiatives, encompassing acquisitions, partnerships and significant improvements in its delivery and payment systems. Simultaneously, Walmart is committed to elevating its merchandise offerings, ensuring a diverse and appealing product assortment. Innovation extends to its supply chain, where the company is enhancing capacity and introducing cutting-edge solutions.

Walmart has a market cap of $435.7 billion as of Jan 16, 2024. This Zacks Rank #3 (Hold) stock has a trailing four-quarter earnings surprise of 8.2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings suggests growth of 5.5% and 2.4%, respectively, from the year-ago reported numbers. The company pays out a quarterly dividend of 57 cents ($2.28 annualized) per share, giving a 1.4% yield at the current stock price. WMT’s payout ratio is 35, with a five-year dividend growth rate of 1.9%. (Check WMT’s dividend history here)

Home Depot: Headquartered in Atlanta, GA, this company stands as another distinguished blue-chip stock, dominating the home improvement retail sector. Its consistent expansion in both Professional and Do-It-Yourself segments, fortified by an extensive product lineup and digital innovations, underpins its remarkable success. The company's interconnected retail strategy and robust technological infrastructure have amplified web traffic, leading to growth in digital sales.

Home Depot has a market cap of $356.7 billion. This Zacks Rank #3 stock has a trailing four-quarter earnings surprise of 1.8%, on average. The company pays out a quarterly dividend of $2.09 ($8.36 annualized) per share, giving a 2.3% yield at the current stock price. HD’s payout ratio is 54, with a five-year dividend growth rate of 12.7%.

Costco: A consumer defensive stock, Costco, has been surviving the market turmoil pretty well. Strategic investments, a customer-centric approach, merchandise initiatives and an emphasis on memberships have been the discount retailer’s primary strengths. Costco's distinctive membership business model and pricing power set it apart from traditional players. Through a calculated approach that involves identifying untapped markets and tailoring offerings to meet customer preferences, Costco has managed to deepen its roots.

Costco has a market cap of $302.4 billion. This Zacks Rank #3 stock has a trailing four-quarter earnings surprise of 2.6%, on average.

The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS suggests growth of 4.3% and 7.4%, respectively, from the year-ago period. The company pays out a quarterly dividend of $1.02 ($4.08 annualized) per share, giving a 0.6% yield at the current stock price. COST’s payout ratio is 27, with a five-year dividend growth rate of 12.2%.