Two Dividend-Yielding Shares Worth Investing and Maintaining Long-Term
In the world of dividend investing, being choosy is key. A decent dividend yield paired with a lengthy dividend history, robust profits, and promising growth prospects are the ideal qualities for a dividend stock. Two such stocks that merit consideration are Tanger (SKT) and Target (TGT). Despite operating in the retail sector, which is vulnerable to tariffs and inflation, these companies offer attractive prospects for long-term dividend investors.
Growth Through Smart Acquisitions for Tanger
Tanger, with its 42 outlet centers and open-air retail centers, has shown resilience in the face of pandemic-induced challenges. It recorded its highest occupancy rate in over a decade in 2024. With over 40% of its rental base set for renewal in the upcoming two years, there's a prime opportunity to increase rents.
Beyond boosting rentals from existing properties, Tanger has strategically expanded its portfolio through shrewd acquisitions. For instance, it bought an open-air shopping center in Little Rock, Arkansas last December for $73 million and a mixed-use center in Cleveland, Ohio earlier this month for $167 million. Both acquisitions were made while keeping its balance sheet in check. Furthermore, both properties have untapped potential for tenant mix improvement and rent hikes.
While Tanger's balance sheet remains sound, with just $1.5 billion in net debt at the end of 2024, it remains exposed to interest rate risk. However, this risk isn't overly concerning given the stable debt structure and spread-out debt maturities.
Tanger's Q4 dividend is $0.275 per share, with a forward dividend yield of about 3%. The dividend is well-covered, consuming only 51% of FFO in 2024. Cesare Alfano, Tanger's CEO, expects FFO to grow by 8% in 2025, hinting at a potential upcoming dividend increase.
Target's Solid Sales Growth
Target has reported encouraging holiday sales figures. The retail giant witnessed November and December comparable sales increase by 2%, backed by a 9% surge in digital sales. Similarly, store traffic rose by 3%. Target broke records for Black Friday and Cyber Monday sales in 2024. The holiday season saw improving demand for discretionary categories such as apparel and toys, areas that have previously been a struggle for Target.
Target is targeting adjusted EPS between $8.30 and $8.90 for 2024, resulting in a P/E ratio of around 15. While Target may face backlash for its rollback of diversity, equity, and inclusion initiatives in 2025, the impact remains unclear.
Target pays a quarterly dividend of $1.12, resulting in a forward dividend yield of approximately 3.5%. The company has enjoyed an uninterrupted dividend streak since 1967, a valuable asset for shareholders.
Target's stock has plunged over 50% from its all-time high, making it an attractive prospect for long-term divided investors. Despite facing similar challenges as Walmart, Target's strong sales in key categories, as well as its appealing dividend and P/E ratio, suggest it has potential to recover in the future.
Tanger's strategic acquisitions have not only boosted its rental income but also provided opportunities for tenant mix improvement and rent hikes. The company spent $73 million on an open-air shopping center in Little Rock, Arkansas, and $167 million on a mixed-use center in Cleveland, Ohio, both in 2024.
Target's digital sales surged by 9% during the holiday season of 2024, contributing to a 2% increase in overall comparable sales and a 3% rise in store traffic. The retail giant broke records for Black Friday and Cyber Monday sales during that period.
Despite Target's strong performance, the company faced criticism for its decision to rollback diversity, equity, and inclusion initiatives in 2025. The impact of this decision on the company remains unclear.
Tanger's CEO, Cesare Alfano, expects the company's FFO to grow by 8% in 2025, suggesting a potential upcoming dividend increase. The company's Q4 dividend is $0.275 per share, with a forward dividend yield of 3%, well-covered by just 51% of FFO in 2024.
