Jumping on the Target Dividend. TGT

There has been a lot of people talking about Target (TGT) lately.  You might think it because they have a target on their back to be bought.  However, they had a large price drop recently, so maybe they did.  Reading our fellow dividend bloggers, such as Dividend Hawk, DividendTime and Dividend Daze, we decided that we should take a look at the Target dividend.

Target Dividend

Who is Target – TGT

Target (TGT) is a big box general merchandise retailer.  They sell products such as food, household products, apparel, home furnishings, and electronics.  They have about 1,800 stores in the USA. Target (TGT) is headquartered in Minneapolis, Minnesota and was started in 1902.

Jumping on the Target Dividend

Target (TGT) has a great dividend history.  They currently have Dividend Aristocrat status.  We needed some Dividend Aristocrats in our portfolio.  With 49 years of increasing dividend payments, Target will enter into a new title.  Dividend King.  A Dividend King is a company that has paid an increasing dividend for 50 or more years.  This is a very select group.  When Target raises its dividend in August, which it has done for a number of years now, they will get the new amazing title, Dividend King.


But before we can get there, is the dividend safe.  Target (TGT) has said they expect to earn about $5 a share in 2016.  Currently, they are paying out $2.40 per share per year in dividends.  With a dividend payment ratio of less than 50%, they have room to increase their dividend, even if they have a little trouble with future earnings.

Their current yield is 3.7%.  Not a bad yield at all.  If we would have bought them early last week at $71 per share, our dividend would have only been 3.4%.  If we would have bought them at their 3-month high of about $78, our dividend yield would have only been 3.1%.  What a difference 2 months or only 1 week can make.

Valuation After the Drop

Back in November, Target was trading about $77 range.  The stock was trading down, and then they recently projected its 2016 earnings.  And Bam, Target (TGT) sold off into the $65 range, making over a 19% drop from its recent 3-month high point to its lowest.  Going to a store and seeing a 19% off sale on everything makes we want to look around some, so let’s look around the stock.

They have a PE of about 13 on a project $5 in earning.  That is on the lower side for PE values.  There price to sales is also about 0.5, which is low.  So, it appears that we are getting a good value.  So why the recent drop?

On 1/18/17, they actually reported a 30% increasing in online stores for November through December sales.  This should be great news.  And any year now, this internet thing should catch on.  However, their brick and mortar retail stores fell by 3%.  This caused them to lower their 4th quarter earnings from about $1.65 to $1.50 a share.  This is a large decrease.  Do we feel safe buying?

http://investors.target.com/phoenix.zhtml?c=65828&p=irol-IRHome, 2017

With Target (TGT) being almost a Dividend King, we cannot believe this is the first time they have had some troubles.  Over the past 50 years, there were recessions, global problems, new technology, and everything else.  They have had a solid history of getting through everything.  So, we are going to use this opportunity to buy a company that has proven itself in the past.

What I bought

On 1/25/2017, I bought 15 shares of Target (TGT) for $ $976.50, including those targeted commissions.  With their current dividend, we will earn about $36.00 per year.

Do you believe Target (TGT) will keep its status as a Dividend Aristocrats?  Did you use this opportunity to get more Target Dividends?  Please feel free to share in the comment section below.

Disclosure: TGT – We own shares.

 

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22 thoughts on “Jumping on the Target Dividend. TGT

  1. I don’t believe TGT will stay a Dividend Aristocrat, because it will be too busy being a King! Great buy. I think a key to its future growth will be its online presence. Nice to see their online sales have gone up so much. Although I believe it still only accounts for about 3% of their revenue. I would like to see that number go up to at least 10%. Hopefully take some market share away from Amazon, which I know is difficult.

  2. Bought 15 shares of TGT @ 64.50. Also, they sold their pharmacy business to CVS in 2015 and would still manage to get around $5 EPS

    1. With the price drop, they have a cheap PE right now. I am glad to see Target is still making plenty of money. Hopefully, I will start to make lots of money with my dividends from them.

  3. Hi DividendMonkey,

    First off great website I love the insight into some new fresh ideas in potential stocks.

    Target is abit of an Australian brand I can’t see it going anywhere I would be concerned about the the physical stores but if they can move into the online sector which you have noted the world could be the limit. As other big reatilers that I have used and seen online alot are not direct competitors in my view. (Myer, David Jones, Big W).

    Looks Good.

    1. FIiTouT, thank you very much for your kind words. I appreciate it.
      I think Target will continue to do fine. I know a bunch of people who prefer Target as there big box retailer.
      Thank you for stopping by.

  4. TGT has been one of the popular stocks in recent days because of its sudden decline and more attractive current yield as a result. I still do not own any retailers but can see the allure of this name at these levels. Long term I don’t see how most retailers will survive if they stay in their current form. Thanks for sharing.

    1. I imagine that Target and other retailers will have to change over time. With their 49 years of dividend payments, I assume they will adapt. Making lots of money will help them with whatever transformations are coming. Thank you for commenting.

  5. I think there is more downside in short-term, I’ve my eyes on it for $60/sh. Though it can go even lower if we get into a trade war with Mexico or China. Tread carefully in retail, these are strange times.

  6. You could easily compare this to Walmart. Similar price, similar structure. Target just so much more upside to it from here than Walmart could. Do you agree?

  7. I just bought TGT. It is currently the largest position in my tiny portfolio. The retail sector in general worries me a little. But I couldn’t ignore the value and the history. Congrats on the buy.

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