What Target actually does
Target is a retail corporation and discount department-store chain headquartered in Minneapolis, Minnesota. The company dates to 1902, and its first Target store opened in 1962. It sells groceries, household goods, clothing, home products and electronics, with a strong focus on design and owned brands such as Good & Gather and Cat & Jack.
It is part of the S&P 500.
How the business makes money
Target earns a margin on a broad range of products, with owned brands carrying higher margins than national brands. It uses its stores as hubs for pickup, same-day delivery and shipping, which makes fulfilment cheaper than shipping from warehouses.
Because it sells a lot of discretionary items (clothing, home goods, electronics), its results are more sensitive to consumer spending than those of food-heavy retailers like Walmart.
The dividend story
Target has raised its dividend every year for more than five decades, making it a Dividend King and an Aristocrat. It pays quarterly. The yield is moderate, and the company also returns cash through buybacks.
Its record has survived some difficult years, including periods of weaker profit, which shows the strength of the underlying business but also means the payout ratio should be monitored.
What to keep an eye on
- Discretionary spending. A weak consumer hits sales of non-essentials first.
- Inventory and margins. Misjudging demand creates markdowns.
- Competition. Walmart, Amazon and Costco compete for the same shoppers.
- Theft and operating costs. Both can reduce profit.
Quick take
Target is a long-established retailer with a very long dividend record. It is more cyclical than a pure grocery chain, so its dividend growth depends on keeping shoppers loyal.