You Can Do Better Than Nike. Buy This High-Yield Dividend Stock Instead.

Investors have been eagerly awaiting a turnaround for Nike (NKE -0.88%), but the company's stock has continued to decline in recent years. Over the past five years, Nike's stock has seen a negative 25% average annual return, and this year is no exception with a 40% drop in share price. The company's issues have been widely reported, including leadership changes, a new strategy focused on rebuilding wholesale channels, and declining sales in China and its sportswear and Jordan brands.

Nike's fiscal 2027 guidance also remains pessimistic, with revenue expected to decline in the high single digits and adjusted earnings down from $2.10 to $1.15-$1.35 per share.

In contrast to Nike's struggles, Target (TGT +0.29%) has emerged as a better-value option with a higher dividend. Target has faced its own challenges, such as tariffs and rising inflation, leading to a four-year period of negative stock returns from 2022-2025. However, Target has made a strong comeback this year, with shares up 57% year-to-date.

While the company's five-year annualized returns remain negative at -10%, there are positive signs of improvement. Target's leadership change, with Michael Fiddelke as CEO, has been a key factor in the turnaround. The company has invested $6 billion into new stores, remodels, and infrastructure, while focusing on specific areas where it excels, such as home, beauty, baby, health and wellness, women's style, food and beverage, and pop culture.

Target has also reduced costs for consumers and improved the customer experience, resulting in a 5% sales increase in the second quarter and a 3.8% year-over-year increase in comp sales. Earnings per share have also risen 100% to $4.11, with management raising full-year guidance for fiscal 2026 to 5% sales growth and earnings between $7.50 and $8.50 per share, an increase of $0.75 from previous guidance.

Target's dividend is another appealing aspect, as it has raised its payout for 57 consecutive years, making it a Dividend King. With a high yield of 2.93% and a sustainable payout ratio of 45%, Target presents a compelling case as a buy. At just 16 times earnings and 15 times forward earnings, Target is also a more affordable option compared to Nike. Consider The Motley Fool for premium stock recommendations, portfolio guidance, and more.