Even With Rising Treasury Yields, I'd Still Rather Buy This Unstoppable Dividend Stock for Passive Income.
Key Points
Its dividend has risen annually for 55 straight years, making it a Dividend King.
Target has begun to reinvigorate its business, leading to a return in net sales growth.
Despite its improvements, Target's stock valuation remains well below that of Walmart and Costco.
The yield on the 10-year Treasury is currently hovering close to 5%. On the surface at least, that level of return undermines the case for dividend stocks. Since Treasuries are effectively risk-free, their returns are guaranteed, whereas dividend stocks do not guarantee share price gains or dividend payments.
Fortunately, I own a high-yielding dividend stock that is on the rise. Despite the fact that the increasing stock price has reduced the yield to well below 5%, I believe investors are better off holding that stock than buying Treasuries. Here's why.
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The dividend stock to buy
The dividend stock I prefer to the 10-year Treasury is Target (NYSE: TGT).
Admittedly, my decision relies somewhat on bias and great timing. When I bought Target in October 2025, the dividend yield was 5.1%, a higher return than the 10-year Treasury both then and now. Moreover, the stock is up by around 80% since I purchased it, far surpassing a return on a Treasury.
Nonetheless, I argue that the stock is an excellent choice, even at the current dividend yield of 2.9%. One reason, obviously, is the dividend. Despite the declining yield, the $4.64-per-share annual payout has risen every year for the past 55 years, making it a Dividend King.
If Target were to stop the payout hikes, it would likely undermine confidence in the stock. Additionally, in the first six months of fiscal 2026 (ended Aug. 1), its $2.1 billion in free cash flow was well above the $1 billion in payout costs, making it likely it can maintain this dividend.
Target stock is probably also set to rise, thanks to the efforts of its new CEO, Michael Fiddelke. The company pledged $5 billion to remodel stores and invest in the supply chain to improve efficiency. It also wants to improve the guest experience and plans to revamp its merchandise selection, effectively restoring its reputation as an "upscale discounter."
The efforts may already be bearing fruit. After years of declining revenue, its $52 billion in net sales for the first half of fiscal 2026 rose 6% year over year. Also, despite increased investments in the company, net earnings of $2.7 billion rose 35% year over year.
Furthermore, even with the rising stock price, Target stock sells at only a 17 P/E ratio. In comparison, Walmart (NASDAQ: WMT) and Costco Wholesale (NASDAQ: COST) trade at 40 and 45 times earnings, respectively. Considering Target's return to growth, its valuation looks favorable compared to its peers.
Consider Target stock
Even after its yearly gains, Target stock looks like a higher-yielding investment than a 10-year Treasury. Indeed, Target does not offer guarantees, and its dividend yield no longer matches that of 10-year Treasuries.
However, Target stock is on a tear in 2026, and that has significantly reduced its dividend yield. Finally, the Dividend King's streak of payout hikes is likely to continue, and, given that Target still trades at a huge discount to peers, investors are likely to beat the returns of a 10-year Treasury by buying Target stock.
Will Healy has positions in Target. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.