10 Undervalued Dividend Aristocrats to Buy According to Hedge Funds

3. Target Corporation (NYSE:TGT)

Dividend Yield as of December 23: 2.87%

Number of Hedge Fund Holders: 49

P/E Ratio: 13.94

Target Corporation (NYSE:TGT) is an American legacy company that offers a wide range of merchandise, including clothing for all ages, beauty products, home essentials, pet supplies, groceries, electronics, toys, furniture, and seasonal items.

Target Corporation (NYSE:TGT)’s Q3 results reflected a mix of growth and challenges. Comparable sales rose 0.3%, at the low end of expectations, while EPS fell short due to cautious consumer spending on discretionary items and cost pressures. Guest traffic grew by 2.4%, but a 2% drop in average ticket size offset gains, reflecting tighter household budgets. October saw stronger sales, boosted by Target Circle promotions, although discretionary categories remained soft. Digital sales were a highlight, growing 10.8%, with same-day delivery up nearly 20% and Drive-Up and ship-to-home services showing double-digit growth. Target’s Roundel ad business also grew by 11.5%, contributing to revenue and margins. Despite these successes, operating margins fell to 4.6%, down 60 basis points, due to higher supply chain and digital fulfillment costs.

Year-to-date, Target Corporation (NYSE:TGT) invested nearly $2 billion in capital expenditures as per the Q3 earnings call, focusing on new stores, remodels, and tech projects, with 2025 CapEx projected at $4-$5 billion. Dividends increased to $516 million in Q3, and $354 million was allocated to share repurchases. The company paid a $1.12 per share dividend to stakeholders on December 10. In 2024, Target marked the 53rd straight year of raising its annual dividend, making it one of the best dividend aristocrat stocks on our list.

Target Corporation (NYSE:TGT) expects Q4 comparable sales to remain flat due to discretionary softness and fewer holiday shopping days. Full-year EPS guidance was revised to $8.30–$8.90, reflecting these challenges. Despite short-term hurdles, the company remains optimistic about long-term growth, confident in its strategy and ability to deliver solid financial performance over the next decade.

TGT is a hedge fund favorite, with 49 funds holding stakes in the company at the end of Q3 2024. Ric Dillon’s Diamond Hill Capital is the leading stakeholder of Target, with 2.95 million shares worth $460.3 million.