Justin Pope, The Motley Fool

Sat, Jun 14, 2025, 1:11 AM5 min read

• Economic headwinds, tariffs, and missteps on social issues have weighed on Target's business.

• The good news? Target is a financially sound company with a safe dividend.

• Target has work to do to get the business going, but the stock's cheap valuation and generous dividend yield could pay off for patient investors.

• 10 stocks we like better than Target ›

Retail is a competitive and dynamic business, so Target (NYSE: TGT) deserves credit for its generations of steady success. That said, things haven't been rosy lately. The company's sales are in decline, and the stock has plummeted over 60% from its high, its sharpest decline since the 1990s. Things don't get this bad without some mistakes, no doubt. But is Target a dying company?

I don't think so. Target hasn't been an awful investment for several years now, but that's then, and it's time to focus on the future. The company is working through some challenges, but remains fundamentally sound, with reasons for optimism.

Here is why investors should consider doubling up on this Dividend King today.

Target's sales plateaued and began to decline over the past few years. Consumers behave differently for various reasons, but one major trend is that they have become increasingly financially strained over the past few years, primarily due to rampant inflation.

Unique, cool, discretionary merchandise is the foundation of Target's brand.

Groceries and household essentials only accounted for 40.5% of total merchandise sales last year. Therefore, when consumers cut back on things they may want but don't need, Target will feel the impact. Tariff uncertainty in recent months has only worsened consumer sentiment, which has plummeted to its lowest level since July 2022.

Additionally, Target's decision to walk back diversity, equity, and inclusion (DEI) policies earlier this year sparked backlash from shoppers who organized a 40-day boycott that began in early March.

It leaves Target searching for momentum after the company's merchandise sales dropped 3.1% year over year in Q1 2025, following a 3.2% decline in Q1 2024.

Given all that, it's clear why the stock has done so poorly. Still, it's a stretch to say the business is dying.

Stagnant, or struggling? Yes, but Target's financial foundation remains sound to this day.

Start with a dividend that has ample coverage, despite its 4.4% yield sitting near its all-time high. Target spends a total of $2 billion annually on dividends, but generated over $3.5 billion in free cash flow over the past year.