Investing

Target, a Dividend King, Just Paid Investors: Here's How Much They Got

Trey Thoelcke

Published: December 11, 2024 7:50 am

Key Points

• Target Corp. (NYSE: TGT) just rewarded its shareholders again with a quarterly dividend.
• As a Dividend King, it is the epitome of a steady and reliable stock.
• Take this quiz to see if you’re on track to retire. (sponsored)

Target Corp. (NYSE: TGT) is rewarding its shareholders once again with a quarterly dividend of $1.12, payable on Tuesday, Dec. 10. That is the same as in the prior period. A recent disappointing earnings report dragged the share price down to a 52-week low. However, the dividend payment underscores the management’s commitment to delivering consistent value to investors.

Why Investors Like Dividends

Investors favor dividend stocks for two main reasons. The first is that they offer enticing total return potential. Total return is a comprehensive measure of investment performance that includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. It is one of the most effective ways to boost the prospects of overall investing success.

Dividend stocks can also provide investors with a steady, reliable stream of passive income. Passive income is money that is earned with little to no ongoing effort, usually from assets that generate cash flow. This income can come from a variety of sources, including stock dividends. Generating passive income is a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.

A Dividend King

Target has a reputation for having stable and dependable dividend growth. It has increased its dividend annually for 53 years. That is well more than the 25 straight years of growth it takes for an S&P 500 member to become a Dividend Aristocrat. In fact, it makes the stock a Dividend King, a member of that exclusive group of stocks that have at least 50 consecutive years of dividend growth.

Since 2004, Target’s dividend has grown about 60%. The current dividend yield is 2.9%, which is more than the average yield of the retail industry. The share price is over 146% higher than in early 2004 as well, offering investors growth along with the income.

Target, the Company

Target is an American retail corporation that operates a chain of discount department stores and hypermarkets. It is the seventh-largest retailer in the United States and offers apparel for women, men, boys, girls, toddlers, and infants and newborns, as well as jewelry, accessories, and shoes.

Other products include beauty and personal care, baby gear, cleaning, paper products, and pet supplies. The company also provides dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, and food service. Target’s electronics offerings include video game hardware and software. It also provides toys, entertainment, sporting goods, and luggage, as well as furniture, lighting, storage, kitchenware, small appliances, home decor, bed and bath, home improvement, school/office supplies, greeting cards and party supplies, and other seasonal merchandise. The company sells its products through its stores and digital channels.

Its headquarters are in Minneapolis. The company was founded in 1902, and its name was changed to Target in 2000. The company first went public in 1967. It now competes with or is similar to Amazon.com Inc. (NASDAQ: AMZN), Kroger Co. (NYSE: KR), Walmart Inc. (NYSE: WMT), and others.

Unlike rival Walmart, Target missed earnings expectations for the third quarter and offered a disappointing holiday outlook. Shares plunged afterward, which some considered a buy-the-dip opportunity for long-term investors. At least one analyst reinstated Target stock as a top pick. Earlier in the year, the company scaled back sales of Pride Month merchandise due to the backlash in the previous year.

Target, the Stock

The share price is only about 4% higher than five years ago, while the S&P 500 was up almost 93% in that time. In the past month, the stock is down more than 12%, while the S&P 500 has seen a marginal gain. The stock recently fell to a 52-week low of $120.21 per share. The $141.55 consensus price target signals less than 9% upside in the coming 12 months. Of the 37 analysts who cover the stock, 15 recommend buying shares. Oppenheimer recently reiterated an Outperform rating, but Daiwa Capital has downgraded it to Neutral.

Institutional investors hold about 85% of the shares. BlackRock, State Street, and Vanguard have notable stakes. Almost 13 million shares, or almost 3% of the float, are held short. Note that some executives parted with shares back in September.

Three Surprising Things Billionaires Look for in Dividend Stocks