Dividend Kings are generally considered some of the safest stocks due to their longevity and dividend growth track record. To qualify as a Dividend King, publicly traded companies must be members of the S&P 500 and have increased their dividend annually for at least 50 consecutive years.

This steady-eddie nature makes most Dividend Kings mature companies with consistent but slow-growing revenues. However, upon closer inspection, a few companies may offer the best of both worlds: Dividend King status and growth stock potential.

Today we will study one of these dividend-increasing growth stocks and examine why it could offer incredible growth in 2022.

Two ladies dressed in red walking through a shopping center with a handful of bags.

Image source: Getty Images.

Targeting sales growth

Driven by its mission "to help all families discover the joy of everyday life," Target (TGT 0.59%) has accelerated its top-line growth as it develops its omnichannel presence. Posting digital sales growth of 29% year over year for the third quarter, the company's e-commerce unit has grown to account for 18% of its overall sales.

However, what is fantastic about this 29% growth is that it comes on top of 155% year-over-year growth in Q3 2020 -- meaning that Target has more than tripled its digital sales over the last two years. On top of all this, customers paired over half of these digital sales with one of Target's three same-day services: drive-up, Shipt, and pick-up. The adoption of these same-day services highlights the future stickiness of these sales for Target as shoppers see added value in being able to shop from home when necessary. 

Best of all, despite this solid digital sales growth, Target's in-store sales have held their own, with comparable-store sales rising nearly 10% during Q3. In fact, the company is doubling down on its shop-in-shop strategy by making the following moves:

  • Tripling the number of Disney stores within Target
  • Doubling the number of Apple experience shops
  • Opening 100 new Ulta stores within Target

These shop-in-shops help keep Target's in-store shopping experience relevant and are a fantastic way to build partnerships with some of the strongest brands in the world. As the company looks ahead to reporting earnings in early 2022, it would not be a surprise to see additional sales growth driven by their unique shopping experience during the holiday season.

Earnings per share growth

As impressive as Target's sales growth has been and looks to be for 2022, its earnings per share growth could be even more exciting for investors in the upcoming year. 

TGT Shares Outstanding Chart

TGT Shares Outstanding data by YCharts

Led by its remarkable history of reducing its share count over time, Target has managed to further amplify its earnings growth from the steady sales growth it has seen recently. As a result, should the company meet or beat its guidance of mid-to-high single-digit sales growth for Q4 and beyond, investors could see new record highs for earnings per share in 2022. 

Making this all the more interesting for investors is that Target's digital sales operations are still incredibly young and offer higher margin potential as they mature. Once Target begins to realize the logistical and operational efficiencies from its developing omnichannel strategy, higher levels of profitability could become the norm.

Trading with a price-to-earnings ratio of only 18, compared to the S&P 500's average of 29, Target's earnings per share growth potential looks to be available at a discount. 

Dividend growth safety

Best of all for investors, in addition to Target's potential on both its top and bottom lines, its 50-year history of making increased dividend payments offers rare predictability from the stock market. Consider that if you bought shares in Target's stock just five years ago, you would yield 5% on that cost today, thanks to its dividend increases.

Furthermore, with a payout ratio of only 22%, this dividend is incredibly well-funded and should be primed to continue growing far into the future. Historically, stocks that increase their dividends annually and maintain a payout ratio below 50% have outperformed the broader market, making Target's dividend track record highly promising.

Altogether, thanks to its ongoing omnichannel success and the potential of its shop-in-shop growth strategy, Target is poised to deliver surprising growth in 2022. Moreover, Target's combination of dividend growth and accelerating sales and earnings per share growth leave it uniquely positioned to blend the worlds of dividend payments and growth stocks -- making it an excellent core holding for the long term.