Why Target is a retiree’s dream action
What exactly is a retiree’s dream stock? Each person can have a different idea. But one possibility is a stock that offers a combination of a strong and secure business, steady growth, and dividend payouts.
This type of stock is ideal because it earns you income every year – and you can count on stock price gains when the company shows increasing income, for example. Where to find all this? With a business that’s probably right in your neighborhood. And you could even shop there regularly.
I’m talking about Target (NYSE: TGT). Let’s see why the retail giant is the dream stock for retirees.
A look at the past
First, let’s look at the recent past. Target rewarded investors with a 38% share gain last year. The coronavirus pandemic has dramatically increased revenue as people rushed to Target for the most part. And Target’s contactless services kept the business growing throughout the crisis.
Here, Target has proven its worth as a strong and secure business. Its strength in the essentials and range of pickup options have kept customers coming back. Target increased sales by over $ 15 billion last year, which is more than the previous 11 years combined.
Another key to Target’s strength is its use of its stores. They process over 95% of online and in-store orders. Target’s costs are 90% lower per unit when it doesn’t have to ship an item from a warehouse. All of this means that we can count on Target to attract customers and manage its costs, even in the worst of times.
Now let’s talk about growth. Some may question Target’s prospects beyond the pandemic, but the company’s latest earnings report shows the momentum is here to stay. The pandemic is not over, but more and more consumers have resumed their usual shopping habits. And Target’s digital revenue and same-day services like order pickup and drive-up continue to grow significantly.
Digital sales grew 50% in the first quarter and same-day services grew over 90%. At the same time, store sales have more than recovered after stagnating at the worst of the pandemic. Same store sales increased 18% in the quarter. Target sees more and more customers buying online and more shopping in its stores than before the crisis.
Proof of sustainable growth
There are a few other things that show Target’s growth. All areas of the company’s business saw first-quarter sales gains, many in double digits. And private label sales soared 36%, a record increase. This is an important point because many buyers come to Target specifically for its brands. The retailer has nearly 50 own brands, and 10 of them bring in at least $ 1 billion in sales per year. One of the latest All in Motion sportswear lines, grew into a billion dollar brand in its year of launch.
Finally, Target’s track record indicates that investors can count on the retailer for dividends. The company is a Dividend Aristocrat, which means it has increased its dividend for at least 25 consecutive years. The company pays an annual dividend of $ 3.60 and the yield is 1.52%. The target’s dividend is higher than that of the competitor Walmart.
Target is a business that you will want to buy and hold for the long term. You can expect safety, growth and dividends from this winning retail stock. All of this makes Target the perfect stock for a retired person, but also a great choice for investors at all stages of life.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.