2 Retail Dividend Giants

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Introduction

Walmart sells 6 times more than Target. Target earns more on every dollar. Both are Dividend Kings. But their dominance didn’t happen by chance. Both companies have spent decades earning consumer trust and investor loyalty, so much so that they belong to an exclusive club very few companies ever reach. Each has raised its dividend for more than 50 consecutive years, earning the coveted title of Dividend King

This contrast sits at the core of one of the most compelling debates in US retail. While Walmart dominates through scale and price leadership, Target relies on margins, branding, and customer loyalty. Understanding how these two strategies play out in cash flow and dividends reveals a simple but powerful question for investors: do you prioritise stability—or upside?

Operating in the same industry, Walmart and Target have taken fundamentally different paths to success—paths that shape their growth, profitability, and appeal to investors today.

1. Different Paths to Retail Dominance

Walmart’s strategy is built on one simple promise: affordability at scale.

Its Everyday Low Price (EDLP) model prioritises consistently low prices over short-term promotions. Supported by its vast hypermarket footprint, Walmart turns scale into an advantage few competitors can match.

In recent years, the retailer has gone a step further, blending physical and digital shopping through its expanding omnichannel ecosystem. Services like Walmart+, combined with a fast-growing digital advertising business, have strengthened Walmart’s position as the go-to destination for value and convenience.

With unmatched buying power, Walmart often acts as the price setter for the entire retail industry.

Target, however, plays a very different game.

Rather than competing purely on price, Target leans into style, data, and brand experience. By using technology and consumer insights, the retailer curates fashionable merchandise at accessible price points.

Its portfolio of proprietary brands and the Target Circle loyalty program help foster trust and emotional brand affinity—turning routine shopping trips into experiences customers actively seek out.

2. Scale vs Pricing Power

Net Sales (US$ Billion)

Walmart’s fiscal year ends around 31 January, and its growth trajectory has been remarkably consistent.

In FY2025, the retail giant posted a 5% year-on-year increase in revenue, reaching nearly US$681 billion, a testament to the power of scale.

3. Gross Profit (US$ Billion)

Disciplined cost management has allowed Walmart to translate massive sales volumes into rising profitability, with gross profit climbing steadily over the past three years.

Target’s story is more nuanced.

Soft consumer spending particularly in discretionary categories has pressured revenue, with net sales declining for two consecutive years. FY2025 sales came in at US$106.56 billion.

Yet despite weaker top-line performance, Target delivered consistent gross profit growth. Improved inventory control and a greater emphasis on higher-margin house brands helped cushion the impact of slowing sales.

3. Margin Matters

Gross Profit Margin (%)

While Walmart generates more than six times Target’s revenue, Target consistently earns more gross profit per dollar of sales.

Thanks to its higher mix of discretionary and general merchandise, Target’s gross margin averaged around 27% over the past three years well above Walmart’s 24.4%.

This highlights the trade-off clearly: scale versus pricing power.

4. Beyond the Checkout LanesL Cash Flow Strength

Operating Cash Flow (US$ Billion)

Walmart’s operational discipline continues to shine. Operating cash flow rose to US$36.44 billion in FY2025, reinforcing the company’s ability to fund growth internally.

Free Cash Flow (US$ Billion)

Walmart’s free cash flow surged in FY2024 before moderating in FY2025, as the company ramped up capital spending to support long-term initiatives. This moderation reflects reinvestment, not financial strain.

Target’s turnaround here is striking.

After posting negative free cash flow in FY2023, the retailer rebounded sharply, delivering two consecutive years of positive and improving FCF.

5 Free Cash Flow Efficiency

Free Cash Flow Margin (%)

Target’s recovery is also visible in its margins. In FY2025, its FCF margin reached 4.2%, more than double Walmart’s.

That said, Target’s negative margin in FY2023 serves as a reminder that its cash generation has been less consistent. Continued improvements in inventory management and merchandising will be key—especially if discretionary spending rebounds.

6 Dividend Kings for a Reason

Total Dividend Per Share (US$)

Both retailers proudly uphold their Dividend King status.

Walmart has increased its dividend for 52 consecutive years, raising payouts from US$0.75 per share in FY2023 to US$0.83 in FY2025.

Target’s record is equally impressive, with dividends climbing from US$3.96 to US$4.44 per share over the same period.

This unwavering commitment underscores the financial resilience and shareholder-first mindset of both companies

7 The Bottom Line

The Investor Takeaway: Stability or Upside?

Walmart and Target stand as pillars of the US retail industry but they appeal to investors in different ways.

Walmart’s immense scale, price leadership, and steady cash generation make it a compelling long-term income anchor.

Target, meanwhile, offers higher margins and stronger upside potential, particularly if consumer discretionary spending recovers.

In the end, whether you favour stability or growth, both retailers exemplify what it means to reward shareholders consistently—cycle after cycle.

Two giants. Two strategies. One enduring lesson: quality compounds over time.

Happy Investing!!