Investing in Target Stock 3 Years Ago Would Have Resulted in a 21% Loss, Falling Behind the S&P 500 by 60%

Key Points

• Target shares have underperformed the overall market over the last three years.
• The company has faced challenges in growing its sales, with same-store sales dropping.
• Target's board of directors has not cut the quarterly dividend this year, but the lack of dividend growth is a warning sign.
• There are 10 stocks that the Motley Fool Stock Advisor team believes are better investments than Target.

Department store chain Target (NYSE: TGT) has been a disappointment for investors over the past three years, with its stock price underperforming the broader market. It's crucial for investors to periodically assess a company's long-term prospects and consider whether to invest in a stock with better prospects.

If you made a $5,000 investment in Target shares three years ago, you'd have a lot less money today. The stock price closed at $145.67 on June 13 compared to $184.50 three years ago, resulting in a 21% loss in stock price. During this time, the S&P 500 index gained 60%. Investing $5,000 then would have purchased 27 shares in June 2022, which are now worth about $3,832.

You would have also collected dividends during those three years, which amounted to $1.14 per share per quarter, totaling $1,140 in dividends. However, your total return for your initial $5,000 investment is only $4,972.

By contrast, investing that same amount in the S&P 500 index would have resulted in nearly $8,400 today.

Challenges Ahead

While Target has not cut its dividend this year, the company has faced challenges in growing its sales. Same-store sales (comps) have been dropping, with a 3.9% decline in the fiscal first-quarter period ended on May 3. The company estimates it will earn $1.80 to $2.30 per share in 2025.

Target's share price performance and lack of dividend growth are clear warning signs to stay away from the stock right now.

Should You Invest $1,000 in Target Right Now?

Before you buy stock in Target, consider this: The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks for investors to buy now. These 10 stocks have the potential to produce significant returns in the coming years. The Stock Advisor's total average return is 791%, outperforming the S&P 500 by a significant margin of 174%.

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