Are You Looking for a High-Growth Dividend Stock?
Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Target in Focus
Target (TGT) is headquartered in Minneapolis, and is in the Retail-Wholesale sector. The stock has seen a price change of 16.92% since the start of the year. The retailer is currently shelling out a dividend of $1.1 per share, with a dividend yield of 2.64%. This compares to the Retail - Discount Stores industry's yield of 1.1% and the S&P 500's yield of 1.59%.
Looking at dividend growth, the company's current annualized dividend of $4.40 is up 0.9% from last year. Target has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 14.86%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Target's current payout ratio is 49%. This means it paid out 49% of its trailing 12-month EPS as dividend.
TGT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2024 is $9.39 per share, which represents a year-over-year growth rate of 5.03%.
Bottom Line
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. But, not every company offers a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. Income investors must be conscious of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that TGT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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Target Corporation (TGT) : Free Stock Analysis Report