Walmart (WMT 1.49%) and Target (TGT 0.59%) stand out as retailers with unusually strong dividend prospects. The two companies each have raised their payouts for more than 45 consecutive years, demonstrating financial strength and stability through a wide range of selling conditions.

Yet while they compete in the same industry, Target and Walmart will appeal to different types of investors. Let's compare these dividend giants to see which would fit better in your portfolio.

The dividend record

Walmart has boosted its dividend in each fiscal year since 1974, putting it at 49 consecutive years. Target's streak is just slightly longer at 51 years. Given that history, it's a safe assumption to make that both retailers can thrive through economic downturns, and that their management teams prioritize conservative capital management.

Target's yield is much higher, and the dividend has been expanding more quickly in recent years. The company's 2023 increase was 20%, pushing its yield to 2.6% today. Walmart, in contrast, pays shareholders 1.6% currently, and its latest increase was 2%.

Keep in mind that Target's previous increase occurred during early fiscal 2022, back when profitability was surging. The retailer's decelerating earnings growth in the last few quarters implies much more modest dividend increases ahead for 2023 and beyond.

Sales and earnings trends

Walmart has the stronger earnings profile right now, while the bullish thesis for Target stock relies on a rebound ahead for this key metric. Operating profit margin slumped to 4% of sales in 2022, after expanding to 8% of sales in the prior year.

WMT Operating Margin (TTM) Chart

WMT Operating Margin (TTM) data by YCharts

Target's business was hurt by a shift in demand away from consumer discretionary niches like home furnishings, leading to price cuts and inventory writedown charges. Walmart's broader merchandise portfolio allowed it to maintain margins at close to its normal 3% to 4% range. Target's earnings could see a solid rebound if operating margin begins moving back toward the pre-pandemic rate of 6%, but there's a higher risk of disappointment here if economic conditions worsen.

The better value

The two retailers are being assigned the same value on Wall Street today of roughly 0.6 times annual sales. Target executives are forecasting essentially flat sales in 2023 along with just a small improvement in profitability. Walmart, meanwhile, is expecting modest gains on both the top and bottom lines.

Target shares seem like the better deal, if you believe the company's 2022 period was an outlier and that sales and earnings trends will return to more normal rates over the next several years. But risk-averse investors will prefer Walmart stock because of stabilizing factors like its huge sales base, steady revenue growth, and stable profit margin.

The good news is that both dividend stocks have become cheaper in the past year as investors worry about a potential recession on the way. Walmart and Target are highly likely to maintain their payout increases even in that bearish scenario. Choosing between the two stocks mainly depends on your appetite for risk and your patience in waiting for the next cyclical upturn to reaccelerate sales growth again.