Anyone currently holding Target (TGT) stock can be forgiven for being grumpy over the past year or so. Shares of this blue-chip are down more than 15% in the past year, the company was the focal point of one of the biggest consumer hacks in history, and things got so bad that CEO Gregg Steinhafel was directed toward the exits.
However, for as bad as things have been lately, new money actually would be well-spent in Target.
That’s because amid its many blemishes, TGT stock is one of the best ways to find income in a laughably stingy sector.
Retail Stocks – Pinching Pennies Until the Bitter End
Typically, when you think dividend misers, your head goes straight to tech stocks. And for good reason — when you’re trying to stay ahead of the fastest-moving field in Wall Street, R&D is your lifeblood, so that’s where the cash goes.
However, as many tech stocks have matured, yields have slowly grown in the sector, and many legacy names in the space now make for excellent sources of income.
No, if you really want to call cheapskate shenanigans, you should be calling them on retail.
If you take a look at the nine major sectors as represented by State Street’s (STT) SPDR ETFs you actually find that it’s the Consumer Discretionary SPDR (XLY) — which holds Target stock and other retailers — at the bottom of the dividend pile with a paltry yield of 1.25%.
To paint a more accurate picture, the SPDR S&P Retail ETF (XRT), which is far more concentrated in traditional retailers, yields just 0.69%.
Which is why, in the world of retail stocks, Target — with its generous 3.4% payout — should be viewed no less than a benevolent god right now.
TGT Stock – Its Pain Really Is Your Gain
There are two ways for a stock’s dividend yield to go up:
- The company increases the amount of money it pays in dividends on a regular basis.
- The stock price goes down. After all, if yield is just dividends divided by share price, and you’re dividing by a smaller share price, well … you’re going to get a bigger number.
TGT stock is the beneficiary of both.
Shares have dwindled by 15% in the past year, exaggerating the effects of a very aggressive dividend growth plan that has seen quarterly payouts jump from 16 cents per share in 2009 to 52 cents currently — a darn impressive 225% improvement.
That said, a good yield doesn’t mean squat if you’re holding a crappy stock. But TGT is far from a crappy stock.