Top Grad Stocks 2021: Target Is a Lifetime Buy-and-Hold

Editor’s Note: This article is a part of our “Top Grad Stocks 2021” series, where our savvy market analysts recommend their best picks for new graduates’ portfolios. Check out “Money Moves for Recent Grads” for more finance advice and click here to see more stocks for your must-buy list.

If you’re going to “stock up” on investments that won’t keep you awake at night worrying about volatility, then I invite you to consider big-box retail giant Target (NYSE:TGT). Target stock might not look cheap at first glance, but a deeper probe will reveal that it’s actually a terrific bargain.

Buying stocks is probably the last thing on recent college graduates’ minds, but when it comes to investing in your future, there’s no time like the present.

You might think of consumer staple Target as a boring old box store, but TGT stock is a great holding for any long-term portfolio.

The Covid-19 pandemic gave the world a sudden lesson about what’s necessary and what’s really just a luxury. People were forced to prioritize their purchases — and “consumer discretionary” purchases weren’t in vogue anymore.

Now so-called defensive names like Target are fashionable again. But really, great companies never go out of style.

And as the trends come and go and some folks are whipsawed out of the markets by speculative bets, you can sit tight with your Target shares, collect the dividends, and stay in the trade worry-free.

A Closer Look at TGT Stock

Let’s not get the wrong idea here. During vicious bear markets, Target stock will go down with everything else.

Or at least, that’s what happened in the past. The financial crisis of 2008 to 2009 proves this point.

Target stock went down then, and it also slid during the onset of the Covid-19 pandemic. During times of crisis, investors tend to panic-sell everything, including perfectly good stocks.

So there’s no way to avoid that issue. Nevertheless, 2020 provided an excellent example of how stocks representing great companies tend to rebound faster from crisis situations.

When the Covid-19 crisis hit the financial markets in early 2020, Target stock fell from a starting point of $128.74 to $90.17. That’s a decline of around 30%.

Stocks in some other sectors plunged 40%, 50% or even more during that time. So, Target investors didn’t do too badly, comparatively speaking.

Besides, by Aug. 4, 2020, the stock was back up to $129. And by Aug. 19, the share price reached $154.69.

The lesson here is to carefully pick out stocks that represent outstanding companies — and stand by them when the going gets tough.

A Dividend Aristocrat

What the price history of Target stock doesn’t necessarily reflect is another crucial source of wealth building.

I’m referring to dividends — and Target is known for rewarding its loyal shareholders, quarter after quarter.

The company is what is known as a “dividend aristocrat,” meaning that it’s part of the S&P 500 and has increased its dividend payouts for at least 25 consecutive years.

There are only around 65 companies that qualify as a dividend aristocrat, and Target is one of them.

The company pays out a forward annual dividend yield of 1.3%. That might not sound like a lot, but consider how those consistent payouts can add up over the years.

And that’s the magic of compounding — but it’s really not magic at all. Actually, it’s what happens when you keep on re-investing your Target stock dividends. Over time, your wealth can really grow.

Trends come and go, but over a longer time frame, new graduates don’t need to bet big on speculative plays. Instead, you can sit tight with Target shares, collect the dividends and stay in the trade worry-free.

A Surprisingly Trendy Store

You might not think of Target as a company that keeps up with the latest trends. But the company is actually taking steps to stay relevant.

Take ecommerce as an example. Target isn’t just a brick-and-mortar retail chain nowadays.

In fact, the company’s ecommerce sales increased by a whopping 145% in its fiscal year ending on Jan. 30, 2021.

Besides ecommerce, another relevant trend in the 2020s is the plant-based food craze that’s sweeping the nation.

If you think that Target is ignoring this trend, think again. In the fall, the company plans to roll out a lineup of plant-based dips, meat alternatives, coffee creamers and other products under its Good & Gather brand.

Many of them priced under $5, so Target is also helping to change the common misconception that plant-based foods are necessarily unaffordable.

The Bottom Line on TGT Stock

New graduates might be tempted to load up on risky stocks, and maybe there’s a place for small positions in more volatile assets.

For the most part, however, recent graduates shouldn’t jump into the deep end of the investing pool. Target can offer a great entry point into the world of investing because it’s a slow but steady income producer.

Maybe you’ve shopped at Target stores many times without thinking of the investment possibilities — that’s perfectly understandable.

Now you can give the company a closer look as it’s a dividend payer, an ecommerce contender, a purveyor of plant-based goods and an unassailable investment in good times and bad.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.