Target Corp. investors had good reason to smile Wednesday.

The Minneapolis-based retailer boosted its quarterly dividend by 20 percent to 36 cents a share amid signs that economy has begun to stumble again.

The announcement came ahead of the company's annual shareholders meeting on Wednesday in Chicago, where CEO Gregg Steinhafel touted the company's strategy of providing stylish, yet affordable, home goods and accessories.

"We continue to build on what we do well," he said.

But the Commerce Department reported Wednesday that May retail sales fell 0.2 percent, the second consecutive month of declines, as limited wage growth and higher unemployment curtail consumer spending. As a result, economists at Goldman Sachs, Morgan Stanley, and Credit Suisse all reduced their growth projections for the year.

"The consumer is pulling back," said Michael Brown, an economist at Wells Fargo Securities in Charlotte, N.C. "There isn't a lot of job creation. We will continue to see softer numbers."

That spells bad news for major retailers like Target, which has until now, enjoyed a strong start to 2012.

Target's sales at stores open for at least a year rose 5.3 percent in the first quarter. Since January, Target stock has jumped about 20 percent to Wednesday's close of $58.05.

But Target has had to work for its numbers and not necessarily rely on an economic recovery for growth. The company has spent heavily to remodel its stores, improve its website, and boost traffic through initiatives like its 5 percent Redcard discount program and P-Fresh grocery format.

"I would just tell you that Target found its game," Steinhafel said during a recent conference call. "We're just doing a lot of things very well in our stores right now."

In addition, Target recently launched the well-received the Shops of Target, a collection of exclusive merchandise from five boutique shops around the country. Next month, Target plans to open its smaller format CityTarget stores in San Francisco, Seattle, and Chicago.

Despite its good performance in the first quarter, Target executives say they are still cautious about the rest of 2012 because of the weak economy.

"We've got a lot of wood left to chop here in the year before we get to the end," CFO John Mulligan recently told analysts.

Bloomberg News and the Associated Press contributed to this report. Thomas Lee • 612-673-4113