Target Corp (NYSE:TGT) ranks 9th in Insider Monkey’s list of the 10 Best Dividend Aristocrat Stocks to Buy Now.
Before analyzing the stock, let’s see what’s happening in the dividend investing space these days.
Dividend growth investing strategy is in the spotlight these days as investors scramble to offset market risks in a higher-for-longer environment where interest rates aren’t expected to come down anytime soon. Matt Powers, Powers Advisory Group President, while talking to CNBC, recently said that while a high interest rate environment is a headwind for dividend growth strategy, he is looking to buy more dividend growth stocks and practice patience in the current scenario. The analyst said his dividend income strategy is looking to increase total returns by preferring dividend growth stocks instead of high-yield dividend stocks. Matt Powers said that he looks for 10-year track record of dividend growth while choosing stocks.
How to Choose Dividend Growth Stocks
He highlighted that payout ratio is one of the most important metrics in dividend strategies. For example, one of the notable picks of Matt Powers is MasterCard, whose payout ratio is less than 30%. This, according to Powers, shows that the company is investing significantly to grow. He’s also picking up Hershey on the back of rising cocoa prices. Lockheed Martin is another dividend growth stock pick of the analyst amid the geopolitical situation that bodes well for companies like Lockheed. This shows instead of limiting focus to yields, dividend growth investors should focus on core business strengths and catalysts because these are the factors that affect dividend payment and income growth trajectory of companies.
Dividend investing has always sparked investor interest amid a proven track record of dividend strategies. A Raymond James report titled “The Power of Dividends in a Portfolio” highlighted that $1 invested in the S&P 500 in December 1929 would have grown to $57 over the following 75 years. But the same $1 invested along with reinvested dividends would have grown to a whopping $1,353.
Dividend stocks have also contributed heavily to the total market returns over the past several decades. From 1930 to 2023, 40% of the annualized total return of the S&P 500 came from payment and reinvestment of dividends.
Target Corp (NYSE:TGT)
Number of Hedge Fund Investors: 67
Target Corp (NYSE:TGT) has increased its dividends for 52 years without a break, an achievement few could lay claim to especially in the retail industry where things are volatile amid fledgling consumer sentiment. Morgan Stanley earlier this month talked about favorable stocks in the current volatile environment. Morgan Stanley analysts recommended Target Corp (NYSE:TGT) in the Consumer Staples category as it believes Target Corp (NYSE:TGT), along with some other retailers, offer “value” in an environment where consumers are cutting back on spending.
Earlier this month, Target Corp (NYSE:TGT) announced that it plans to cut prices for a whopping 5,000 frequently shopped items across its stores.
Of the 919 hedge funds tracked by Insider Monkey 67 hedge funds reported owning stakes in Target Corp (NYSE:TGT). The biggest stakeholder of Target Corp (NYSE:TGT) during this period was Ric Dillon’s Diamond Hill Capital which had a $500 million stake in Target Corp (NYSE:TGT).
Diamond Hill Large Cap Strategy stated the following regarding Target Corporation (NYSE:TGT) in its fourth quarter 2023 investor letter:
Other top contributors in Q4 included Allstate, American International Group (AIG) and Target Corporation (NYSE:TGT). US-based mass retailer Target is capitalizing on cleaner inventory, lower freight costs and improved efficiency to improve profitability — and investors rewarded shares accordingly in Q4.
Target Corporation (NYSE:TGT) ranks 9th on our list of the 10 Best Dividend Aristocrat Stocks To Buy Now.
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Disclosure: None. This article is originally published at Insider Monkey.
