By Charles SizemoreTarget's (TGT) latest dividend announcement got a lot of attention for its bungled delivery. It published the news of its dividend boost before the board of directors had actually sat down to vote on it. Oops. I suppose it would have been embarrassing—and detrimental to Target's stock price—if the board had opted not to approve the dividend hike. But that's rarely a problem for Target. You see, Target is one of the most reliable dividend raisers in America, which is a major reason I own it in my Dividend Growth Portfolio. Let's dig into the details.
Target raised its quarterly dividend by 7.7%, from 52 cents per share to 56 cents. This is 44th consecutive year that Target has bumped its dividend. Not a bad run indeed. The 7.7% increase isn't a bad hike given the weakness in the retail sector this year. But it's one of the skimpier dividend hikes Target has made in a long time. This time last year, Target hiked its dividend by 20.6%. And over the past ten years, Target has managed annual dividend growth of 20.2% per year. What's impressive about Target's dividend growth is its consistency. Those 20% annual gains are not the result of large increases years ago that skew the averages today. Over the past three and five-year periods, Target has generated dividend growth of 20.0% and 23.4%, respectively.
Target's dividend yield on June 18th, at current share prices, is 2.53%. That might not sound particularly high, but remember, the 10-year Treasury still only yields a measly 2.3%. Let's now take a look at how that dividend growth affects investor returns. One of my favorite metrics is "yield on cost."