1 Magnificent S&P 500 Dividend Stock Down 56% to Buy and Hold Forever

Key Points

• Target is dealing with a host of challenges, and sales have been declining.

• It's still opening new stores, and digital sales are growing.

• Target has raised its dividend for the past 54 years.

• 10 stocks we like better than Target ›

As the market rebounds, many bargain opportunities are disappearing. Nvidia, for example, was down almost 30% earlier this year, and it's now up 27% year to date, crushing the market.

If you missed out on some stocks that went lower, don't fret. There are always opportunities on the market, especially if you have a long-term mindset. Target (NYSE: TGT), for example, is a top dividend stock that's still down in the dumps. Although it, too, has started to climb, it's still 56% off of its all-time highs.

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Here's why this is a stock you can buy today and hold forever.

Image source: Target.

Why Target stock is down

Target was on top of the world, or at least on top of shopping lists, early in the pandemic. Its distinctive brand of store, with its "cheap and chic" aesthetic, plus its formidable omnichannel options, attracted customers for essentials and more.

In the aftermath, there have been many setbacks as the company has cycled through unfavorable macroeconomic changes. Today, the primary difficulties are shoppers focused on essentials instead of discretionary purchases and a suppressed real estate market that's trickling down to lower sales in housewares and home improvement. These are two of Target's most important categories, with essentials like groceries a less critical part of the whole than for similar retailers.

It's been tough on the financial statements. In the 2025 fiscal first quarter (ended May 3), comparable sales (comps) fell 3.8% from last year, including a 5.7% drop in physical store comps. Total sales, a category that includes new stores and other revenue, were down 2.8%.

Why it can get back up

Even though it's hard to see it today, Target has many things going for it. There were even some strong indicators in the first quarter, including a 13.6% increase in operating income year over year and a 4.7% increase in digital comps. Target's best-in-class omnichannel program continues to deliver, and same-day membership sales were up 35%. That's an excellent sign of loyalty and engagement.

Management announced a new acceleration effort to harness its strengths and become more connected and agile. It expects this effort to increase delivery speeds and boost growth.

Since many of its woes today are connected to external factors like pressure in the economy, Target's chances are likely to be somewhat dictated by the shopping climate. If interest rates go down and the real estate market improves, Target should bounce back. That's the long-term arc, and Target's been around for a long time, generally resonating with customers and reporting growth.

Management also mentioned that the company has been hurt by unfavorable consumer sentiment based on political stances it has taken. It's working to get back in shoppers' favor.

Finally, in the midst of everything else going on, Target continues to open new stores. It has nearly 2,000 in the U.S., but it has plans for nearly 50 in the works. It has a carefully curated opening model that includes different store sizes for different locations, and that allows it to open in dense urban areas as well as large suburban spaces.

The exclusive dividend club

Target is a Dividend King, and it has paid and raised its dividend for the past 54 years. It's reliable for passive income under almost any circumstances, but more than that, it also has a great yield. At today's low price, it yields 4.3%. While you're waiting for the price to recover, you can already benefit from the excellent dividend.

Plus, at current levels, Target stock trades at less than 12 times trailing 12-month earnings. That makes it a bargain right now.

Although there are no guarantees, Target has an excellent future outlook with new stores and an improving economy. If you're looking for a bargain and passive income, Target is a great option.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Target. The Motley Fool has a disclosure policy.