We recently compiled a list of 10 Best Dividend Aristocrats According to Wall Street Analysts. In this article we are going to take a look at where Target Corporation (NYSE:TGT) stands against the other dividend aristocrats.
Shifts in investment trends have revealed new insights for investors in recent years. Certain times call for specific investments, and it’s often experienced investors who can spot these opportunities. However, it’s clear that the value of a good investment remains steady, even amidst ongoing changes. This is where the long-standing dividend aristocrats play a role. These companies are strong dividend payers, having raised their payouts for at least 25 consecutive years.
The extended periods of dividend increases have significantly boosted the impressive returns of these stocks over time. Since its inception in 2005, the Dividend Aristocrats Index has outperformed the broader market with lower volatility, according to a report by ProShares. In addition, these stocks demonstrated strong performance in all market conditions, capturing 90% of market gains while only experiencing 82% of market declines. Also read: 10 Best Dividend Aristocrats with Over 3% Yield.
Achieving 25 consecutive years of dividend growth is quite an accomplishment. Out of approximately 6,000 stocks listed on the NYSE and Nasdaq, only 67 are part of the prestigious Dividend Aristocrats index in 2024. This highlights that only a small number of companies have reached this milestone. Maintaining a record of annual dividend increases for 25 years means the company has managed to boost shareholder payouts through various challenges, including the dot-com bubble, the 2007 financial crisis, and the pandemic. This reflects a robust business model, strong cash flow visibility, and disciplined management of capital. Even dividend aristocrats can struggle with consistency, as we’ve seen recently. Companies like Walgreens and 3M were unable to sustain their decades-long dividend growth streaks and have been removed from the Dividend Aristocrats club this year. This highlights the importance of financial strength for dividend aristocrats. The Great Financial Crisis exposed the financial vulnerabilities of these dividend-growers, as 17 out of the 60 Aristocrats in the S&P 500 were removed in 2008 and 2009.
As mentioned before, dividend aristocrats have consistently outperformed the broader market since their inception, even during market downturns. Don Kilbride, a senior managing director and portfolio manager at Wellington Management, has noted this performance, particularly with the Vanguard Dividend Growth fund, which he manages. This fund focuses on companies that have reliably increased their dividends annually, some for decades. During the 2008 market crash, while the market fell 37%, Vanguard Dividend Growth only lost about two-thirds of that amount, thanks to its dividend-generating stocks. As the market recovered, the fund quickly made up for its losses, outperforming many of its peers. Kilbride further mentioned that dividend growth is crucial for weathering tough markets and achieving long-term success, stating that its benefits are substantial and enduring.
According to analysts, for those building their portfolios, incorporating dividend investments can be beneficial, particularly if the dividends are reinvested. By using dividends to purchase additional shares each time they are received, investors create a cycle where payouts increase with the number of shares owned, leading to the ability to acquire even more shares. In this article, we will take a look at some of the best dividend aristocrat stocks according to analysts.
Our Methodology:
For our list, we first scanned a list of the best dividend aristocrat stocks, which are the companies that have raised their dividends for 25 consecutive years or more. From this group, we picked stocks with a projected upside potential of over 10% based on analyst price targets. The stocks are ranked according to their upside potential, as of August 7. We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 920 funds as of Q1 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A woman purchasing groceries at a Target store, with a cart full of products.
Target Corporation (NYSE:TGT)
Analyst Upside Potential as of August 7: 29.7%
An American retail corporation, Target Corporation (NYSE:TGT) tops our list of the best dividend aristocrat stocks. The company has consistently experimented with its business operations but has struggled to return to the pandemic levels due to supply chain disruptions, inflation, and reduced consumer spending on non-essential goods. In the first quarter of 2024, the company reported revenue of $24.5 billion, marking a 3.12% decline from the same period the previous year. Comparable sales also fell by 3.7% compared to the prior year, although they met expectations. Despite these challenges, the company is proactively addressing them by aligning with customer demands. With the rise in online shopping, the company has recently partnered with Shopify, a global e-commerce platform, to feature a range of popular merchants and products on Target Plus. This collaboration is designed to enhance the company’s third-party digital marketplace by offering a curated selection of products to customers.
Target Corporation (NYSE:TGT) fared well during the 2020 pandemic due to its timely transition to digital channels. The stock price surged by over 100% from March 2020 to March 2021. Moreover, the company’s revenue demonstrated an upward trend from 2020 to 2022 but experienced a decline in 2023. Since the start of this year, the stock is down by over 6%.
On June 12, Target Corporation (NYSE:TGT) declared a quarterly dividend of $1.12 per share, having raised it by 2%. Through this increase, the company stretched its dividend growth streak to 53 years. The company has also remained committed to its shareholder obligation, returning $508 million to investors through dividends in the first quarter of 2024. With a dividend yield of 3.34% as of August 7, TGT is one of the best dividend aristocrat stocks on our list.
Target Corporation (NYSE:TGT) was a popular buy among elite money managers at the end of Q1 2024 as hedge fund positions in the company jumped to 67, from 58 in the preceding quarter, according to Insider Monkey’s database. The stakes owned by these hedge funds are collectively worth over $2.26 billion. With roughly 3 million shares, Diamond Hill Capital was the company’s leading stakeholder in Q1.
Overall TGT ranks 1st on our list of the best dividend aristocrats to buy according to Wall Street Analysts. While we acknowledge the potential of TGT as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than TGT but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.