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Target Dividend Stock Analysis (TGT)

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Target dividend stock analysis (TGT)

Target Dividend

(updated 5/26/2017)

The Target dividend has been paid since 1967 and increased for 49 consecutive years;
qualifying the company as a Dividend Aristocrat and Dividend Champion.

Price: $54.39
Current Dividend: $2.40

Dividend Yield: 4.4%
Cash Dividend Payout Ratio: 28%

Market Capitalization: 30 B
Enterprise Value: 40 B

Description

Sector: Consumer Defensive
Industry: Discount Stores

Target is the second largest discount retailer in the United States (Wal-Mart is #1). The company has 1800 locations and 74 billion in revenues. It is in business to offer everyday essentials one-stop shopping at discount prices. Approximately two-thirds of Target’s products are national brands and one-third owned or exclusive brands.

The company offers its products through brick and mortar stores, online, or mobile devices. Products include household essentials (pharmacy, beauty, personal care, baby care, cleaning and paper products), hardlines (electronics, music, movies, books, computer software, sporting goods, etc.), apparel, food and pet supplies (dry groceries, dairy, frozen food, beverages, deli, meats, produce, etc.), and home furnishings.

SWOT Analysis For Target

Strengths

Target has a well-known brand, convenient well-established locations and large economies of scale. The company is focusing on its U.S. business after an unsuccessful attempt at moving into Canada.

Weaknesses

Most of Targets competition (i.e. Wal-Mart, Costco, Kroger) have equal or better strengths (i.e. economies of scale).

Opportunities

Target is successfully moving into urban areas with smaller stores that boast better sales productivity. With only eight CityTarget stores there is an avenue for growth in an industry that is fairly saturated.

Threats

Like everyone in the industry, Target is threatened on the e-commerce side by Amazon. Lower margins are an industry trend because of intense competition.

Dividend Analyzer Checklist

(updated January 2017)

Dividend Safety Score (19/33 points)

Dividend Per Share (ttm): $2.28
Dividend Payout Ratio (ttm):  41%
Dividend Per Share (10 Year Growth): 19.6%
Cash From Operations (CFO) Per Share (ttm):  $8.21
CFO Dividend Coverage (CFO / DPS):  3.6   (4/6 points)
Free Cash Flow (FCF) Per Share (ttm):  $5.70
FCF Dividend Coverage (FCF / DPS):   2.5   (5/6 points)
Net Financial Debt:  $11595 M
Total Assets:  $38603 M
Net Financial Debt / Total Assets: 30% (4/12 points)
Net Financial Debt to EBITDA (ttm):  176%
Total Liabilities to Assets Ratio (Qtr.):   71%
Piotroski Score (1-9) (TTM):  (6/9 points)

Profitability & Growth Score (21/33 points)

Revenue (10 Year Growth) *CAGR > 4.14%:   3.4% (0/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%:   6.8%  (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 2.8% (0/6 points)
Operating Earnings Yield (ttm):  11.8%  (6/7 points)
Net Income (ttm):  $3346 M
Gross Profit (ttm):  $21079 M
Total Assets:  $38603 M
Gross Profitability Ratio = GP / Total Assets:  55% (11/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 13%
Return on Invested Capital (ROIC):  13%
Return on Invested Capital (ROIC) (5 Year Median):  8%
Return on Invested Capital (ROIC) (10 Year Median):  9%

Valuation Score (27/34 points)

Free Cash Flow Yield (ttm): 7.7%  (8/9 points)
EV to EBIT (ttm):   10.2  (7/9 points)
EV to EBITDA (ttm):   7.1  (7/9 points)
PE10:   21.3  (5/7 points)
Price to Sales Ratio (ttm):  0.7
Price to Book Value (ttm):  3.9
Price to Earnings Ratio (P/E) (ttm):  14.0

TOTAL POINTS – (67/100) (50 is an average score)

*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.

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Conclusion

(updated January 2017)

Target (TGT) is ranked #30 (out of 246) overall and #6 (out of 34) in the Consumer Defensive sector by the Dividend Analyzer.

Target’s Profitability & Growth, and Valuation scores are well above average. If you are choosing between Wal-Mart and Target, Wal-Mart, is the superior choice. However, larger dividend portfolios should consider owning both stocks.

 

Portfolio Position Disclosures:
DVB Foundation Portfolio – None
DVB Dividend Growth – None
DVB High Income – None
Arbor Asset Allocation Model Portfolio (AAAMP) – None

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Disclaimer: While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.
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