Like most investors, I like buying stocks that are winners. But sometimes appearances can be deceiving. A stock that has skyrocketed can end up being a loser over the long run. A stock that has plummeted can turn around and deliver huge long-term gains.

I think Target (TGT 0.18%) is an example of a winner in the latter category. Here's why I just bought this underperforming Dividend King.

A better story than the stock performance reflects

Target's share price has fallen 16% over the last 12 months. That's especially dismal considering that the S&P 500 has soared 20% higher during this period.

Why has Target stock lagged the market so much? The giant retailer's sales have been weaker than expected. In the third quarter of 2023, same-store sales fell 4.9% year over year. High inflation has taken a toll on consumer spending, especially on discretionary goods.

However, Target has a better story than its stock performance reflects. Despite the external headwinds, the company has made smart moves to increase its profitability. While sales were disappointing in Q3, Target's earnings per share jumped 36% year over year -- well above the high end of the company's guidance range.

If we look at just the last three months, Target's shares have handily outgained the S&P 500. Inflation is moderating, although it's still not as low as anyone would like. The U.S. economy is also proving to be surprisingly resilient.

A fast-growing dividend

One part of Target's investment thesis remains highly appealing. The company's dividend yield currently tops 3%, near the upper end of its range over the last five years.

Target has paid a dividend every quarter since its IPO in October 1967. That's 226 quarters (56.5 years) of dividends. Even more impressive, the retailer has increased its dividend for 52 consecutive years.

What I especially like is how fast Target's dividend has grown. Since early 2021, the company's dividend payout has increased by nearly 62%. That translates into a compound annual growth rate of more than 17%.

To be sure, the most recent dividend increase was much smaller. However, Target appears to be in a good position to keep raising its dividends going forward, with a dividend payout ratio of around 55%.

"Expect more. Pay less."

Go to any of Target's nearly 2,000 stores, and you'll probably see the company's slogan, "Expect More. Pay Less." I think those four words succinctly sum up my rationale for buying the stock right now.

I expect more from Target than what it has delivered in the recent past. Most of the challenges that the company faces are beyond its control, such as high inflation. The good news, though, is that the macroeconomic environment is improving. The even better news is that Target has successfully navigated difficult times in the past and appears to be doing so again.

Target's same-day fulfillment, especially its curbside pickup program, continues to gain momentum. The company's partnerships with Starbucks, Disney, and Ulta Beauty for "stores within stores" should help attract customers.

I expect more dividends, too. Target's management realizes how important the company's dividend track record is to investors. It's not surprising that CFO Michael Fiddelke emphasized in the Q3 earnings call that one of Target's top capital deployment priorities is to "support the dividend and build on our record of annual increases."

What about paying less? Target's shares currently trade less than 16 times forward earnings. By comparison, the S&P 500's forward earnings multiple is nearly 20.7. The consumer staples sector's average forward earnings multiple is 19.7. Target's valuation looks attractive, in my view.

The bottom line for me is that Target remains a winner. That's true even though it hasn't looked like one over the last 12 months.