If I Could Only Buy and Hold 1 Dividend Stock Heading Into the Eye of a Stock Market Storm, This Would Be It

Long-term investors often like to think that stocks will simply rise forever. While the S&P 500 has generally risen over the decades, such increases did not come without enduring storms. Some of those storms, like the dot-com bust or the 2008 financial crisis, led to years of pain.

During such times, consumers and investors alike tend to go back to basics, and that shift often leads investors to choose companies whose sales remain steady regardless of the overall economy. Assuming I did not own it already (which I do), I would buy and hold Target (NYSE: TGT) stock, and here's why.

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Why Target?

Even in times of market devastation, consumers need groceries, personal care products, and "affordable" luxuries. This plays into Target's business case, as it offers all of the above.

But knowing that, why wouldn't investors choose competitors such as Walmart, Kroger, or Dollar General, all of which sell basics at affordable prices?

That decision comes down to the state of Target. Under its previous CEO, declining net sales, chronically high inventories, and unnecessary political stances were among the problems that weighed on Target's stock. After peaking at more than $226 per share in 2021, Target stock fell as low as $84 per share by late 2025.

Nonetheless, in February, former COO Michael Fiddelke became CEO. Under Fiddelke, Target pledged to spend $5 billion to remodel stores, change its product assortment to reclaim its reputation as an "upscale discounter," upgrade its supply chain, and hire additional store staff to improve the shopper experience.

Improving results

Target is still early in this recovery stage, but since Fiddelke became CEO on Feb. 1, the stock has risen by more than 40%, reaching a point where it has surpassed the "Magnificent Seven" in 2026.

The recovery in its financials has helped. Net sales had been declining since peaking in 2022. However, in the first half of 2026 (ended Aug. 1), the company's net sales of $52 billion increased by 6% from year-ago levels.

Amid the aforementioned spending to improve operations, selling, general, and administrative expenses surged by 13% over the same time frame. Despite that higher cost, the $2.7 billion in net income earned in the first two quarters of fiscal 2026 rose by 35% over the same period.

That improvement should go a long way to supporting its dividend. Target is a Dividend King by virtue of its 55 consecutive years of payout hikes. At $4.64 per share annually, new shareholders earn a 3.1% yield on the dividend, far above the S&P 500 average of 1.1%.

Also, even with the recent increase in the stock price, Target trades at a price-to-earnings (P/E) ratio of 15. In comparison, Walmart and Kroger trade at 43x and 36x earnings, respectively. Although Dollar General is comparable at a 17 P/E ratio, its 1.9% dividend yield is far below that of Target. Such conditions not only suggest limited downside in a market downturn but also a significant cash return while the stock rises further.

Own Target in a market downturn

If the dreaded market storm appears, Target should keep investors safe.

Indeed, Target's current state is a company in recovery. Nonetheless, its net sales come from selling products that remain in demand regardless of economic cycles.

Moreover, net sales growth recently returned amid efforts to revamp the company. Despite improving conditions, Target's stock offers a generous, growing dividend while trading at a much lower P/E ratio than most of its peers. That should position investors for both income and long-term growth regardless of what happens in the overall market.

Will Healy has positions in Target. The Motley Fool has positions in and recommends Dollar General, Target, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.