Key Points

• Target began paying quarterly dividends when it went public 59 years ago. There have been eight U.S. recessions in that time.

• The chain has boosted its distributions in each of the last 55 years, covering seven of those economic recessions.

• With recent guidance hikes, Target could have a much larger-than-usual dividend hike coming in June next year.

• 10 stocks we like better than Target ›

A lot has happened since Target (NYSE: TGT) started paying quarterly dividends near the end of 1967. The country has experienced eight recessions, lasting as little as two months to as long as 18 months. The checks keep coming, and Target has boosted its payout rate for 55 consecutive years.

Can it keep the quarterly distributions coming? How much can you collect in dividend income annually with a $10,000 investment? It's time to take a closer look at what a stake in the mass market retailer can do for you -- and your pocketbook.

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It checks out

Time- and recession-tested, Target stock pays out a generous dividend of $1.16 a share every three months. This translates into an annual payout of $4.64 for a current yield of 2.97%. A $10,000 investment should generate $297 a year in passive income over the next 12 months, but the chances are good that it will be marginally higher.

When Target boosted its quarterly dividend rate this summer -- from $1.14 to $1.16 per share -- it marked 55 years of hikes. It will probably do so again next summer. This may not be much of an increase. It's been just $0.02 per share over the last four years, but the hike was much larger in 2021 and again in 2022, when its business was growing at a healthier pace.

Put another way, you will get $1.16 per share over the next three quarters. It should be at least $1.18 per share for next summer's distribution. That means $299 in dividend income over the next 12 months, and potentially more.

Target is crushing the market this year. Store-level comps are moving higher after three years of negative same-store sales. New CEO Michael Fiddelke has hit the ground running -- in the right direction -- with an ambitious turnaround plan.

It will cost money to see his initiatives through, but Target is good for the money. The chain raised its full-year guidance by $0.75 a share this summer. It now expects to earn between $8.25 and $9.25 a share in 2026, excluding the recent one-time gain from tariff refunds. It's going to earn roughly twice as much as it's paying out in dividends this year. With a full year under his leadership belt, I wouldn't be surprised if Fiddelke's next hike in June of next year is substantially higher.

Should you buy stock in Target right now?

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