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TheStreet Open House

Bad Press Aside, Target Has Upside Potential

NEW YORK (TheStreet) -- It's hard to think of a worse setback than the negative press Target (TGT) received when debit and credit card information was hacked from its database. But now, months later, some bright spots are helping the retailer's stock to rebound.

Shares, currently trading around $61, are down 11% for the year to date and down 3% for the past 52 weeks.

Popular stocks like TGT that yield nearly 3% or more I call "bond equivalent stocks," or BES. Lately, investors have been clamoring for BES companies with dividend yields higher the 10-year Treasury bond. This rotation has happened while speculative, high-price-to-earnings stocks have been correcting.

Other BES companies include Procter & Gamble (PG), Johnson & Johnson (JNJ) and technology dividend dominator Intel (INTC). As the following one-month chart of PG illustrates, the demand for BES equities has been ebullient.

PG Chart
PG
data by YCharts

Concerning Target, in spite of the negative press about the database breach, investors have been buying its shares as a BES, too, especially when the stock price drops low enough to lift the dividend yield closer to 3%. With an annual dividend of $1.72 per share, when Target's stock price drops below $60 it creates that desired yield. And there's more to Target than just an attractive dividend.

The nation's second-largest discount retailer is using innovations and customer awareness to keep traffic flowing to its stores. It's offering specialty products like organic and natural foods, and promotions like the chance to buy Samsung's (SSNLF) Galaxy 5 for only $100. This is a big discount on Samsung's star smartphone as a recent article in TheStreet pointed out.

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