This High-Yielding Dividend Stock Has Soared Past the "Magnificent Seven" in 2026

The "Magnificent Seven" are a collection of the leading tech stocks on U.S. markets, and they've normally been excellent investments to own. This year, however, as excitement around artificial intelligence (AI) has begun to cool, some of those stocks simply haven't been doing all that well. Tesla, for instance, is down 18%.

The top performer from the group is Apple, which has risen by 26% thus far. That's a great, market-beating return, but it's still nowhere near as good as how one top dividend stock has done: Target (NYSE:TGT). Shares of the big-box retailer are up a staggering 57%.

What's the deal with Target's rally this year? Here's why it's been overdue, and why it may still be worth buying.

Image source: Getty Images.

Target's valuation has been too low for too long

Although Target's stock has been doing incredibly well this year, in five years, it's still down 39%. For multiple years, it has been performing poorly, and the last time it was in positive territory was in 2021, when it rose by 31%. As consumers have pulled back on discretionary spending, Target's stock has suffered.

Now, however, with a new CEO and the company showing signs of progress in recent earnings reports, the market has begun to pay attention to the retail stock once again.

But to be clear, it's not as if the business is booming. Its growth rate in its most recent quarter (which ended on Aug. 1) was just 5.3%, and the comparable growth rate was only 3.6%. It's also going up against weak comparables, so while its numbers are decent, they aren't amazing.

But when you combine that with its low valuation and high dividend, it has made for a much more compelling investment to own this year, and that's why I believe it can still go higher.

The stock remains incredibly cheap compared to the overall market

Despite its tremendous rally this year, Target is still trading at a fairly modest price-to-earnings (P/E) multiple of just 16, which is far below the S&P 500 average of around 23. And rival Walmart trades at a P/E of 43, making Target look incredibly cheap by comparison.

An extra incentive to own Target's stock is also for its dividend, which currently yields 3%, far higher than the market average of about 1%. It has also consistently raised its payout for 55 consecutive years.

Target's stock can still be an excellent buy at its current price point, both for its potential upside and the dividend income it can generate.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Target, Tesla, and Walmart. The Motley Fool has a disclosure policy.