The retail industry has gone through a lot of turmoil in recent years, and investors have been left scratching their heads trying to figure out how some of the most powerful retailers in the 20th century suddenly found themselves having lost their way and were unable to adapt to changing times. Target (NYSE:TGT) has been quicker to identify the need to adapt to the new e-commerce world than some of its competitors, but it still hasn't been easy for the company to figure out the best way forward.

Target has been a stalwart for dividend investors for decades, with shareholders having enjoyed the higher payouts that the retailer has been able to make. Yet with new challenges facing Target, some wonder whether it can keep increasing its dividends. With that in mind, let's look a little more closely at Target and whether it can boost its dividend in 2020.

Dividend stats on Target

Metric

Latest Stat

Current quarterly dividend per share

$0.66

Current yield

2.1%

Number of consecutive years with dividend increase

52 years

Payout ratio

41%

Last increase

August 2019

Data source: Yahoo! Finance. Last increase refers to ex-dividend date.

A tale of two periods for Target dividends

Target has done a good job of getting people higher payouts over the course of its long history. The department store retailer generally delivered dividend increases at a slow but steady pace during much of the 1980s, 1990s, and 2000s, matching the overall performance of its underlying business.

In the 2010s, Target decided to amp up its dividend growth. Massive payout increases led to Target more than tripling its payout in just five years, reflecting the success that the underlying business was having.

TGT Dividend Chart

TGT Dividend data by YCharts.

More recently, Target has slowed down the pace of its dividend growth. For instance, in 2019, shareholders had to settle for a modest $0.02 per share increase, raising the dividend 3% to its current level of $0.66 per share each quarter. As competition has gotten even fiercer in retail, Target investors have had to accept smaller increases, and some dividend investors haven't been happy about that.

Will Target hit the target with a dividend hike in 2020?

Fundamentally, though, Target has inspired a lot of optimism in 2019. The stock is up sharply as the retailer has figured out a strategy to help it meet customers where they want to be when they shop. With new fulfillment options that give shoppers the ability to drive up to stores and have their goods taken to their vehicle, use in-store pickup for items ordered online, or utilize the Shipt same-day delivery service without ever having to leave their homes, Target has been able to convince its customers that it's willing to go the distance to win and keep their business.

Outside of Target store at dusk.

Image source: Target.

Target has also continued to use the successful strategy of pairing up with well-known brands to offer exclusive items to its shoppers. That's helping Target avoid any negative perceptions associated with catering to price-conscious customers, as it also gives those who like to keep up with fashion a reason to visit its stores as well.

Investing in the initiatives necessary to keep up with the times means that Target can't afford just to pay out all of its profits as dividends. That's why it's likely that Target's 2020 dividend increase will be another small one, likely $0.02 per share to land at $0.68 per share. Yet with impressive share-price gains, dividend stock investors won't complain too much even if a future payout increase turns out to be more modest than hoped.