This stock is set to see big action on Wednesday

Traditional U.S. retailers have been struggling this reporting season, as they continue to face stiff competition from online rivals. The next retailer facing judgment? Target Corp.

The U.S.-based retailer will report its first-quarter results on Wednesday morning, following weak quarterly sales from the likes of J.C. Penney Co. Inc. and Kohl's Corp. last week.

In the case of Target, analysts expect to see sales retreat to $15.6-billion (U.S.), down 3.7 per cent from $16.2-billion in the same period last year, according to Bloomberg – marking the lowest sales figure in more than six years.

The profit picture isn't any better, though perhaps less likely to influence the share price given the current focus on revenue. A consensus of analysts expects Target will report a profit of just 91.4 cents a share, down from $1.29 a share last year.

The retailer, which operates more than 1,800 stores, left Canada in 2015 after failing to find a way to generate a profit after nearly just two years in the country.

But its challenges extend well beyond that setback: Online sales at Amazon.com Inc. are largely to blame for disappointing sales trends that saw Target's comparable sales slump 1.5 per cent in the fourth quarter.

Target's share price has been reflecting this gloom. It has fallen nearly 25 per cent this year, and is currently at the level it was five years ago.

Still, investors have at least two reasons to keep an eye on Target.

First, it has been making headway with its own online sales, which rose 34 per cent in the fourth quarter and contributed 1.8 percentage points to the company's comparable sales growth.

And second, Target has a rich history of raising its dividend, and is on tap to boost it again next month, to an estimated 65 cents a quarter from 60 cents. The current dividend yield is 4.4 per cent – the highest in at least a decade.

But ongoing dividend increases are hardly guaranteed. Target currently uses more than half of its profit to fund its dividends, for a payout ratio of 51 per cent. That's nearly double the payout ratio from just five years ago, and implies that the retailer is going to have to find ways to boost its profit.

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