The tech-fueled bull market has lasted for over three years, but not every sector is participating. Several leading retail brands have sunk sharply over the past year. Several problems can be to blame, like tariffs, a soft labor market, and weak consumer spending.
Target (TGT +2.34%) has navigated much worse economic problems in its century-long operating history. Nonetheless, it is one of the hardest-hit retail stocks, making it a compelling buy for value investors. If you're loaded up on growth stocks and looking to allocate some extra cash to better values, Target and its high dividend yield could hit the bullseye for you.
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Why Target stock is a buy
Target stock is trading down about 65% from its 2021 high. However, many shoppers still flock to Target stores for exclusive merchandise and affordable home goods. Second-quarter sales were down 0.9% year over year, but the company noted that traffic and sales trends improved "meaningfully" over the previous quarter.
The company is deploying artificial intelligence and other data tools to improve sales and efficiency. This indicates there are many things management has yet to fully take advantage of to improve performance, which could ultimately lift Target stock over the next few years.
NYSE: TGT
Key Data Points
The sell-off has brought the stock's forward dividend yield up to around 5%, which means a $500 investment would earn you about $25 a year in passive income. This is based on a quarterly per-share payout of $1.14 and is supported by plenty of earnings. Target is one of the elite dividend payers, having paid a regular dividend since 1967, which reflects solid financial fortitude and competitive advantages in the business. Over the past 54 years, it has consistently raised its dividend annually.
Buying shares of Dividend Kings when they are offering ultra-high yields usually works out well for investors. Target should see better days ahead, making now a great time to invest.
