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Why Target Is a Retiree's Dream Stock

By Adria Cimino - Jun 26, 2021 at 6:00AM

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You'll like this investment during tough times and good times.

What exactly is a retiree's dream stock? Each person may have a different idea. But one possibility is a stock that offers a combination of a solid and safe business, steady growth, and dividend payments.

This sort of stock is ideal because it brings in income for you annually -- and you can count on share-price gains as the company posts growing revenue, for example. Where can you find all of that? With a business that's probably right in your neighborhood. And you might even shop there regularly.

I'm talking about Target (TGT -2.69%). Let's take a look at why the retail giant is the dream stock for retirees.

Two people sitting on a couch together smile as they look at a tablet.

Image source: Getty Images.

A look at the past

First, let's look at the recent past. Target rewarded investors with a 38% share gain last year. The coronavirus pandemic gave revenue a huge lift as people rushed to Target for essentials. And Target's contactless services kept business growing throughout the crisis.

Here, Target proved its value as a solid and safe business. Its strength in essentials and range of pick-up options kept customers coming back. Target grew sales by more than $15 billion last year, which is more than the previous 11 years combined.

Another key to Target's strength is its use of its stores. They fulfill more than 95% of both online and in-store orders. Target's costs are 90% lower per unit when it doesn't have to ship an item from a warehouse. All of this means we can count on Target bringing in customers and managing its costs, even in the worst of times.

Now let's talk about growth. Some may question Target's prospects beyond the pandemic, but the company's latest earnings report shows the momentum is here to stay. The pandemic isn't over, but more and more consumers have returned to their normal shopping habits. And Target's digital revenue and same-day services -- such as order pickup and drive up -- are still growing significantly.

Digital sales rose 50% in the first quarter, and same-day services climbed more than 90%. At the same time, store sales have more than recovered after stagnating during the worst of the pandemic. Same-store sales increased 18% in the quarter. Target is seeing more and more customers buying online and more shopping in its stores than before the crisis.

Proof of lasting growth

A few other elements show Target's growth. All of the company's business categories reported sales gains in the first quarter -- many in the double digits. And owned-brands sales climbed 36%, which is a record increase. This is an important point because many shoppers come to Target specifically for its brands. The retailer has nearly 50 owned brands -- and 10 of them bring in at least $1 billion in sales annually. One of the latest, activewear line All in Motion, became a billion-dollar brand in its launch year.

Finally, Target's track record indicates investors can count on the retailer for dividends. The company is a Dividend Aristocrat, which means it's raised its dividend for at least 25 years in a row. The company pays an annual dividend of $3.60, and the yield is 1.52%. Target's dividend is higher than that of competitor Walmart.

TGT Dividend Chart

TGT Dividend data by YCharts.

Target is a company you'll want to buy and hold onto for the long term. You can expect safety, growth, and dividends from this winning retail stock. All of this makes Target the perfect stock for someone who's retired -- but also a great choice for investors at any stage of life.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Target Corporation Stock Quote
Target Corporation
TGT
$175.34 (-2.69%) $-4.85
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$139.52 (0.11%) $0.15

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