Target Corporation (TGT), Wal-Mart Stores, Inc. (WMT): Is This Your All-Clear Signal to Buy Retailer Stocks?

Good sales growth, great shareholder rewards

What makes these retailers great isn’t just their superior operating performance, but also the fact that they are some of the most shareholder-friendly stocks out there. Target Corporation (NYSE:TGT) has raised its dividend 20% in each of the last two years. All told, last year the company returned more than $2.7 billion to shareholders through dividends and share repurchases, representing more than 90% of net earnings.

Not only has TJX’s stock soared over the past few years, but the company continues to consistently reward shareholders. On the same day of its earnings announcement, TJX also revealed its plan to repurchase approximately $1.3 billion to $1.4 billion of its own stock during the current fiscal year, as well as its intention to raise the common stock dividend by 26%. That marks the 17^th consecutive annual dividend increase for the company.

In 2012, Wal-Mart Stores, Inc. (NYSE:WMT) returned $13 billion to shareholders in the form of dividends and share buybacks. Furthermore, in conjunction with the quarterly and full-year results, Wal-Mart announced it will increase its fiscal 2014 dividend by 18%. Wal-Mart has increased its dividend every year since the first declared dividend of $0.05 per share in March 1974, and the dividend has doubled over the past five years.

Ring the registers

Add it all up, and with this list you’ve got some of the market’s best-performing retailer stocks. The combination of the resilience of the U.S. consumer and the gradual recovery from the worst recession in decades, in addition to their superior performance, makes each of these stocks compelling buys. Going forward, the catalysts are there for future growth: the employment and housing markets continue to improve, signaling monthly U.S. retail sales growth may have further room to run.

Making things even better is the fact that these stocks aren’t expensive. They trade for reasonable multiples of their trailing twelve-month earnings. Each of them currently exchanges hands for around 14-17 times 2012 earnings, which is about on par with the valuation of the broader market. When you consider the dividends and share buybacks these stocks offer, it’s extremely difficult to make a case against any of them. Ride the strength of the American consumer with these great stocks.

The article Is This Your All-Clear Signal to Buy Retailer Stocks? originally appeared on Fool.com and is written by Robert Ciura.

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