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2 Discount Retailers With Decent Dividend Yield to Watch

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Inflationary pressure across a range of products is pinching consumers' pockets who are now flocking to discount stores to cope with the same. Well, the strategy to sell products at discounted prices has helped industry players draw customers who have been seeking both value and convenience amid rising prices.

The consumer price index rose to 8.5% in July 2022 on a year-over-year basis. The Fed’s aggressive rate hikes to tame inflation and cool off an overheated economy are making things tough for consumers by squeezing disposable income.

Under the current circumstances, people in the low-to-middle income groups have been exhibiting a preference for discount stores to get quality products at reasonable prices. Clearly, a differentiated product range resonates well with customers’ spending habits. Shoppers are looking for better deals — be it essentials or other consumer goods — amid the current inflationary environment.

As people look for cheaper alternatives, this has been a tailwind for discount stores. Evidently, discount retailers have emerged as preferred investment options. On that note, investing in high-quality dividend stocks such as Target Corporation (TGT - Free Report) and Big Lots, Inc. (BIG - Free Report) might fetch you promising returns. These two stocks have a dividend yield of greater than 2% and a payout ratio of less than 60, reflecting enough room for future dividend increases.

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Target: This general merchandise retailer has been making investments to enhance omni-channel capabilities, develop new brands, refurbish stores and expand same-day delivery options to provide a seamless shopping experience to customers. Target has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape. The company is always striving to build on its partnerships, especially with popular and high-profile brands.

Target has an estimated long-term earnings growth rate of 9.9%. This Zacks Rank #3 (Hold) company pays out a quarterly dividend of $1.08 ($4.32 annualized) per share, giving a 2.5% yield at the current stock price. TGT’s payout ratio is 41, with a five-year dividend growth rate of 7.2%. (Check TGT’s dividend history here)

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Target Corporation Dividend Yield (TTM)

Target Corporation Dividend Yield (TTM)

Target Corporation dividend-yield-ttm | Target Corporation Quote

Big Lots: The company has been gaining from its transformation initiative, referred to as Operation North Star, which encompasses driving top-line growth, cost containment, and enhancement of systems and infrastructure. With regard to its brands, Broyhill and Real Living have been performing well. Additionally, Big Lots intends to strengthen its balance sheet through asset monetization.

Big Lots has an estimated long-term earnings growth rate of 12%. This Zacks Rank #3 company pays out a quarterly dividend of 30 cents ($1.20 annualized) per share, giving a 5.2% yield at the current stock price. BIG’s payout ratio is 52, with a five-year dividend growth rate of 2.8%.

Big Lots, Inc. Dividend Yield (TTM)

Big Lots, Inc. Dividend Yield (TTM)

Big Lots, Inc. dividend-yield-ttm | Big Lots, Inc. Quote


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