Target (TGT) gave income investors something to cheer about Wednesday, when the discount retailer announced another dividend hike, extending its long streak of annual increases.
The 1.8% increase brings Target's quarterly dividend to $1.12 per share, or $4.48 per share on an annual basis. This works out to be less than half of analysts' expected earnings of $9.35 for the full fiscal year. The next dividend is payable on September 10 to shareholders of record at the close of business on August 21.
Impressively, this latest hike marks the 53rd consecutive year in which Target has raised its annual dividend payment.
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Why Target's dividend hike matters to investors
Businesses with dependable dividend growth are important for several reasons. For one, "companies that raise their payouts like clockwork decade after decade can produce superior total returns (price change plus dividends) over the long run, even if they sport apparently ho-hum yields to begin with," writes Dan Burrows, senior investing writer at Kiplinger, in his feature on the best dividend stocks for dependable dividend growth.
Additionally, dividend growers offer some peace of mind to investors. "After all, any company that manages to raise its dividend year after year – through recession, war, market crashes and more – is demonstrating both its financial resilience and its commitment to returning cash to shareholders," Burrows adds.
Target's decades-long streak of consistent dividend growth has it included in the Dividend Aristocrats, the best dividend stocks in the S&P 500 that have consistently raised their annual payouts for 25 straight years. Only 67 companies make the list.
Is Target stock a buy, sell or hold?
The consumer staples stock has underperformed on the price charts this year, up 4% on a total return basis vs the S&P 500's 13% gain. Still, Wall Street is bullish. According to S&P Global Market Intelligence, analysts' average target price for TGT is $174.45, representing implied upside of over 18% from current levels. Additionally, the consensus recommendation is Buy.
Argus Research analyst Chris Graja is one of those with a Buy rating on Target and an above-average $200 price target.
"We believe that Target remains very relevant to its customers as a place where they can get food and staples at good prices, and stylish, budget-friendly clothing and home goods," Graja said in a May 24 note. The company has earned its status as a "go-to" retailer, the analyst adds, and any weakness in the stock offers a buying opportunity.
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