3 Dividend Stocks That Just Hit 52-Week Highs But Could Be Worth Buying in September

Growth stocks ca Nvidia and Meta platforms he deserves his leadership medals S&P 500 and Nasdaq Composite indices at historical highs. But there are plenty of other valuable, industry-leading companies contributing to the broader market gains.

Walmart (WMT -0.08%), 3M (MMM -2.85%)and ExxonMobil (XOM -2.09%) all are around 52-week highs — Walmart and 3M tied for top performers in Dow Jones Industrial Average so far in 2024. Despite their performance, here’s why all three dividend stocks are still worth buying in September.

Image source: Getty Images.

The cat is out of the bag on this former value stock

Daniel Foelber (Walmart): After underperforming the broader stock market for years, Walmart is up 45% year to date. In the following chart, you can see that Walmart’s sales have entered a new growth spurt, while operating margin didn’t take long to recover from the inflation-induced collapse in 2022 and 2023.

WMT Revenue (TTM) data by YCharts

However, Walmart’s stock price has nearly tripled over the past decade, which may seem overstated given that its track record is good, but perhaps not good enough to warrant such a meteoric rise in its stock price. Here context is key.

Walmart could be much more profitable if it didn’t spend so much on capital expenditures (capex). But he believes his investments in store remodeling, new stores, internal improvements, automation, generative artificial intelligence and more will help the business improve over the long term.

Over the past five years, Walmart’s operating expenses and revenue have grown at about the same rate, or 25.5% and 27.6%, respectively. But investment has nearly doubled — more than $10 billion in five years. By comparison, Walmart’s trailing 12-month net income is just $28.2 billion. Simple math tells us that Walmart would generate high operating margins for 10 years if it didn’t support such an expensive capital program.

Long-term investors care more about where a business is going than where it has been or what it is doing today. Focusing too much on Walmart’s results without considering higher spending or growth plans misses the bigger picture.

Walmart is charting a path to even faster growth in the coming years. Unfortunately, the stock is significantly more expensive than its historical average valuation. Walmart stock has a forward price-to-earnings ratio of 31 — which is higher than the five-year median of 28.9. That means if Walmart brings in analyst consensus estimates over the next 12 months, it would still be more expensive than its historical valuation. And that’s assuming the stock price stays the same.

Walmart is a great business that’s the darling of Wall Street right now, so investors will have to pay a premium if they want a slice. The higher stock price also pushed the dividend yield to just 1.1% — meaning Walmart is no longer a viable source of passive income for dividend investors.

New management brings new approaches to 3M

Lee Samaha (3M): Trading at a 52-week high at the time of writing, 3M stock has performed well for investors over the past year, and I think there’s more to come. There are three reasons for optimism.

First, its cyclical end markets (such as semiconductors, automotive and consumer electronics) look set to decline through 2024. Second, it’s a combination of its pre-existing restructuring program (which is already expanding its profit margins ) and new CEO William Brown’s determination to fundamentally restructure the company. Third, the valuation remains attractive.

The cyclical turn of its end markets will inevitably improve given a lower interest rate environment in 2025 – car sales and consumer electronics investment should improve. Meanwhile, Brown’s initial plans for 3M have already won favor with investors. For example, as previously mentioned, improving the stock-to-sales ratio would free up cash, and hitting Brown’s target could lead to a 28% increase in valuations.

Ultimately, 3M’s valuation remains attractive at 18.1 times estimated earnings for 2024. That might seem high for a value stock, but consider that this will likely turn out to be a low year, and if Brown can change the company’s operating performance, the company could be headed for multi-year earnings expansion.

ExxonMobil has decades of delivering higher dividends to shareholders

Scott Levine (ExxonMobil): Don’t let ExxonMobil’s stock price fool you. While shares of the oil major are changing hands about 7% below the 52-week high they hit in the spring, today is still a great time to click the buy button and strengthen your passive income stream with its dividend with a forward yield of 3.2%.

Part of ExxonMobil’s appeal as a dividend play is the company’s longstanding commitment to increasing payouts. For 42 consecutive years, ExxonMobil has increased its dividend — an achievement not shared by any other company in its peer group, such as Chevron, BP, Shell and TotalEnergies. Taking a briefer look in the rearview mirror, investors will find that ExxonMobil stands out among its peers in another way: its total stock return.

XOM Total Return Price data by YCharts.

Of course, this doesn’t mean ExxonMobil will continue to outperform its peers in the coming years, but it’s certainly noteworthy and illustrates management’s success in driving shareholder value.

Evidence of ExxonMobil’s dividend sustainability is visible in several ways. First, ExxonMobil is getting strong results from its Permian Basin and Guyana production assets and the acquisition of Pioneer Natural Resources, which accounted for $500 million in second-quarter 2024 revenue.

Looking ahead, management projects daily upstream production will increase from a reported 3.8 million barrels of oil equivalent in 2023 to more than 5 million barrels of oil equivalent in 2027.

ExxonMobil has also implemented a corporate cost-savings initiative that will give it more flexibility in returning capital to shareholders. After realizing $9.7 billion in cumulative cost savings in 2023, the company expects to recognize another $5 billion in savings from 2024 to 2027.