No matter what the general market is doing, dividend stocks are great to have in your portfolio. But in difficult or uncertain times -- such as right now -- these players make particularly interesting additions. For two reasons. First, a dividend stock limits your losses during market turmoil by offering you a regular payment that you can count on, even if that particular stock has delivered a poor performance.
And second, during market declines, many of these top stocks could be picked up for a bargain -- so you buy the dividend player for a low price and go on to benefit year after year from passive income and potentially from the stock's recovery and growth over time. So, right now, amid concern about the potential impact of President Trump's tariffs on imports, it's a great idea to add a dividend stock or two to your portfolio.
One in particular offers investors a fantastic opportunity. This magnificent S&P 500 index company has seen its stock drop 60% over the past three years, but it's well positioned for a rebound and long-term growth. Let's check out this top dividend stock to buy and hold forever.
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A commitment to dividends
This particular company has proved its commitment to paying out dividends, recently announcing its 231st straight quarterly dividend payout since 1967, when the company went public. I'm talking about retail giant Target (TGT +0.39%). Not only has Target been paying dividends consistently since that time, but the company also has built a track record of increasing payments year after year.
Target is a Dividend King, meaning it's lifted its dividend for at least the past 50 years. This is positive because it shows the company truly is committed to rewarding shareholders -- and that suggests it's likely to stick with this policy. On top of this, Target generates billions of dollars in free cash flow, meaning it's able to support dividend growth.
TGT Free Cash Flow data by YCharts
The retailer pays an annual dividend of $4.48, representing a yield of 4.7%, far surpassing the 1.2% dividend yield of the S&P 500. And, finally, it's important to remember that such a strong dividend track record also suggests a certain solidity of the dividend-paying company -- in this case, Target. So, it's clear that this retail stock makes a great buy to boost your passive income.
NYSE: TGT
Key Data Points
Target's business over time
Now here's more good news: You'll also like Target for the wonderful business it's built over the years and the potential for more growth ahead. It's true that in recent years, the company has struggled with certain challenges -- such as inventory shrink due to theft in its stores and tougher economic times that have weighed on customers' buying power -- and this has hurt revenue growth.
Still, Target has generated tremendous growth over time, for example increasing revenue by almost $30 billion in five years, and building a booming digital business and delivery/pick-up platform. This focus on digital and delivery has helped the company advance even through these recent tougher moments. In the latest quarter, digital comparable sales rose more than 8%, and same-day delivery climbed 25%.
Target has steadily prepared for the long term by upgrading stores and opening new ones as well as adding to its owned brands. Since Target is in charge of these brands, it has more control over costs and can maximize profitability. This $31 billion portfolio includes names such as the wildly popular Cat & Jack children's brand and the growing grocery brand Good & Gather.
A goal of $15 billion in growth
These elements, as well as Target's plan to invest as much as $5 billion in stores, technology, and the supply chain this year should keep the company on track to its goal of more than $15 billion in revenue growth over the coming five years. Of course, like other retailers, Target imports some products so is likely to feel the impact of Trump's tariffs. The company, in its earnings report last month, said it may "maintain a larger-than-normal cushion on the balance sheet" but is confident about managing the tariff situation.
So, yes, Target stock has suffered, but the company still has significantly grown revenue and profit over the past decade and has what it takes to excel in the years to come. That's why it looks dirt cheap today, trading for 10 times forward earnings estimates, and makes a fantastic dividend stock to buy and hold forever.
