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Target (TGT) Stock Analysis
The Target dividend has been paid since 1967 and increased for 54 consecutive years; qualifying the company as Dividend King, Dividend Aristocrat and Dividend Champion.
Current Dividend Per Share Annualized: $3.60
Target (TGT) Intrinsic Value – Margin of Safety Analysis
(updated May 2022)
Normalized Diluted Earnings Per Share (TTM): $14.10
Free Cash Flow Per Share: $10.31
Cash Flow From Operations Per Share (TTM): $17.51
Estimated Intrinsic Value: $189
Target Buy Price Based on Required Margin of Safety = $145
(Required Margin of Safety Based On Risk Stability
Grade: A = 10%, B = 20%, C = 30%, D = 40%, F = 50%)
Target SELL Price Based on Estimated Intrinsic Value = $208
(Allow Overvaluation Adjusted by Risk Stability Grade:
A = 20%, B = 15%, C = 10%, D = 5%, F = 0%)
Risk / Stability Grade: C
A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.
B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.
C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.
D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.
F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.
Dividend Safety Grade: B+
A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.
B grade indicates a very low probability for a dividend cut.
C grade indicates a low probability for a dividend cut and/or average safety risk.
D grade indicates there are issues that should be considered concerning future dividend payments.
F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.
Business Quality Grade: B+
A grade indicates earnings quality is high or far above average.
B grade indicates earnings quality is good and/or above average.
C grade indicates earnings quality is acceptable or average.
D grade indicates earnings quality is poor and requires thoughtful due diligence.
F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.
Earnings Report: 1/31/22
AAAMP Portfolios Position Disclosures:
Dividend Growth & Income – None
Treasure Trove Twelve – None
Global Dividend Balanced – None
Global Value – None
Global Value Aggressive – None
High Yield – None
Sector: Consumer Defensive
Industry: Discount Stores
With 1,866 stores (2020), Target is a leading American general merchandise retailer, offering a variety of products across several categories, including beauty and household essentials (24% of sales), apparel and accessories (20%), food and beverage (20%), home furnishings and decor (19%), and hardlines (17%).
Most of Target’s stores are large-format, averaging around 130,000 square feet. The company has a significant e-commerce presence, deriving around 7% of sales from the channel. In addition to its namesake stores, Target owns Shipt, an online same-day delivery platform. After it exited Canada in 2015, virtually all of Target’s revenue is generated from the United States.
SWOT Analysis For Target
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.
The company has grown its successful REDcard usage to 24% of sales. The card rewards customers with a 5% discount and has demonstrated it increases loyalty and average sales per customer. Target’s 1/3 private label sales allows the company to differentiate itself from competitors and reap higher margins and faster growth than national brands.
Most of Target’s competition (i.e. Wal-Mart, Costco, Kroger) have equal or better strengths (i.e. economies of scale). Sales per square foot ($290) fall far behind Wal-Mart ($420) and Costco ($1100). The company’s grocery business (15% of sales) is a fraction of its competitors and could be a candidate for big changes in the future.
Target is successfully moving to college campuses and into urban areas with smaller stores. This new format is showing promise by increasing sales per square foot, expanding profit margins, and improving returns on investment.
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.
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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.