The Dow Jones Industrial Average contains 30 components, most of which are stable, dividend-paying blue chip companies. Although they are not known for steep growth rates, even value-oriented Dow stocks can offer positive surprises.

Walmart(NYSE: WMT) has risen an incredible 43.2% since the beginning of the year – bringing the market capitalization above the $600 billion mark for the first time.

Here’s why Wall Street can’t get enough of this dividend stock and whether or not it’s a buy now.

Image source: Getty Images.

A rare winner

Faster-than-expected growth can trigger a rising stock price – especially when so few companies can show impressive results. Many consumer-focused companies have been hit hard by the combination of higher interest rates and uncertain macroeconomic developments. Recent earnings calls from consumer-focused companies from Home Depot And Lowe’s To Lululemon Athletica and others shed light on the caution that consumers have now shown: They are limiting their purchases of non-essential items, such as home improvement projects, expensive vacations or luxury clothing.

Walmart is a beacon of strength in an otherwise gloomy part of the economy. Walmart’s latest earnings report (for the second quarter of fiscal 2025) showed the company growing faster than expected. The company has raised its full-year 2025 results for the second time – it forecasts consolidated net sales growth of 3.75% to 4.75%, consolidated adjusted operating income growth of 6.5% to 8%, and adjusted earnings per share (EPS) of $2.35 to $2.43.

Walmart’s original fiscal 2025 guidance from late February called for consolidated sales growth of 3% to 4%, consolidated operating income growth of 4% to 6% and adjusted earnings per share of $2.23 to $2.37. So the lower bound of Walmart’s new guidance is essentially the same as the upper bound of the original guidance.

Walmart is beating all expectations, while many other companies are revising their forecasts downward and announcing worse-than-expected results.

Most importantly, there are numerous signals that suggest Walmart can maintain or even accelerate its growth pace in the coming years.

Shift up a gear

Consumers flock to Walmart because of the company’s reputation for low prices and value for money. But there’s much more to Walmart’s growth story than just the brand.

In recent years, Walmart has increased its capital expenditures (capex), investing in new stores, renovations of existing stores, e-commerce, its Walmart+ home delivery offering, and more. Over the past five years, Walmart’s revenue has grown 27.6% while its capital expenditures have nearly doubled – showing that Walmart is more focused on future growth than short-term results.

Walmart’s investments are already paying off. Last quarter, Walmart’s U.S. e-commerce sales grew 22% and Walmart Connect advertising sales grew 30%. Walmart Connect allows advertisers to capitalize on Walmart’s in-store and online presence by running campaigns that connect sellers with shoppers. Walmart’s growing e-commerce business makes it an even more attractive target for advertisers. Internationally, Walmart’s e-commerce sales grew 18% and advertising sales grew 23%.

Walmart has made many internal improvements to increase efficiency. For example, Walmart used generative artificial intelligence (AI) to improve its product catalog. CEO Doug McMillon said the following on the second quarter conference call:

We used several large language models to accurately create or enhance over 850 million records in the catalog. Without the use of generative AI, this work would have required nearly 100 times the current number of employees in the same amount of time. And for employees picking online orders, seeing high-quality images of product packaging helps them quickly find what they’re looking for.

Walmart has made several improvements to its supply chain to prepare for continued growth in e-commerce. More than 45% of Walmart’s e-commerce fulfillment center volume in the U.S. is automated. “While we are spending more on capital expenditures than ever before, we are pleased with the returns on those investments, particularly in the automation of our supply chain,” CFO John Rainey said on the conference call.

In summary, Walmart is delivering results and seeing measurable impact from its long-term investments. It is becoming a better company that can compete in a difficult market cycle and hold its own against pure-play e-commerce retailers like. Amazon.

Walmart shares are expensive

As stellar as Walmart’s results have been, its earnings or dividends have not grown at the same rate as its stock price. And when its stock price outpaces earnings and dividend growth, that stock’s valuation becomes more expensive and its dividend yield declines.

Not surprisingly, Walmart’s price-to-earnings (P/E) ratio is now well above its historical average. Even Walmart’s forward P/E ratio – based on analyst estimates for the next 12 months – is above 30.

WMT P/E data from YCharts

In addition, Walmart’s dividend yield has fallen to a paltry 1.1% – which is lower than the S&P5001.3% yield. At least for now, Walmart is no longer a viable source of passive income.

A great company with a premium price tag

Walmart is no longer a value stock, but is now valued as a hybrid between growth and value. Investors looking for a higher yield will find many more attractive options in the Dow – such as Chevron And Coca-Cola.

However, those who believe in Walmart’s vision and are OK with the higher capital spending can still view the stock as a long-term investment. Walmart isn’t cheap, but it is increasing its dividend and buying back shares at a faster rate than in years past. Earnings growth is impressive and could accelerate once macroeconomic conditions improve.

Walmart is on a roll and has gained for good reasons. But the stock has gotten quite expensive, making it ideal for risk-tolerant investors or people who care more about where the stock will be in three to five years than where it is today.

Should you invest $1,000 in Walmart now?

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