It's fun and potentially lucrative, at least in the short run and if your timing is right, to invest in meme stocks. AMC Entertainment (AMC 6.02%) was one such stock, and its share price went for a wild ride. At one point in 2021, the price shot up to well over $600, but it currently trades under $2.
Arcs like that may make for exciting headlines, as well as big paydays for a few lucky traders. But it's awfully hard for a long-term minded investors to profit. It's a much better strategy to own dividend-paying stocks with strong underlying fundamentals.
Target (TGT 4.61%) belongs in that category. Its share price may not shoot up overnight, but it won't collapse, either. However, it could help you build wealth over time through dividends and share price appreciation.
Image source: Getty Images.
Back on Target
Target lost its way in recent years, but new CEO Michael Fiddelke has outlined plans to win back customers and grow sales. The company's fiscal 2025 fourth-quarter (which ended on Jan. 31), same-store sales (comps) dropped 2.5%. However, for fiscal 2026, management expects a small increase in comps.
NYSE: TGT
Key Data Points
Management plans to return to offering more differentiated merchandise, as well as improving the in-store and online customer experiences, and investing in technology.
These seem like sound strategies. After all, serving customers and providing unique offerings at discount prices drew customers to Target for a long time.
Confidently collecting dividends
Meanwhile, Target has raised its payouts to shareholders annually for more than 50 consecutive years, making the company a Dividend King. Last June, it raised its quarterly payout by 1.8% to $1.14 a share, making 2025 its 54th straight year of increases. Given its history, it seems like a safe bet that the company will soon announce another hike.
Of course, it's important to check whether Target can afford the payments. After all, even companies with long dividend-hiking track records eventually encounter situations that require them to cut their payouts or pause in boosting them. But that's not a concern with Target.
Based on its free cash flow -- operating cash flow minus capital expenditures -- the company has plenty of funds with which to pay and raise its dividends. Last year, it generated $2.8 billion in free cash flow, but paid out just $2.1 billion in dividends.
At the current share price, Target has a 3.6% dividend yield. That's more than three times the S&P 500 index's average of 1.1%.
With consistently growing dividends, an attractive yield, and a sensible plan to accelerate sales growth, Target stock should produce attractive total returns over time. It may not generate as many headlines, but it will create wealth for patient shareholders.
