Skip to main content

Overview

Target Corporation (TGT) is a prominent American retailer that owns and manages a department and discount stores chain. Target had over 1,800 storefronts in the United States as of 2021 and an online presence. The company's retail locations sell various goods, including clothes, gadgets, groceries, and home decor.

Target runs a pharmacy and a credit card company along with its retail activities. The business is well known for emphasizing sustainability and social responsibility, and it has made various efforts to lessen its influence on the environment and help regional communities.

Target is a dividend aristocrat with a long history of paying shareholders quarterly dividends. Above all, Target's dividend is fairly secure. Target is an excellent investment holding in addition to being a dividend aristocrat when a diverse portfolio of dividend growth stocks is owned.

Dividend Analysis of Target (TGT)

Target recently increased its regular dividend to $1.08, which is 20% more than the equivalent payment of $0.90 from the previous year. The dividend yield will increase to 2.99% after the payment, which is in line with the industry standard.

The business has a track record of consistently paying dividends with minimal changes. The dividend has increased from a yearly payment of $1.20 in 2012 to a total annual payment of $4.32 in 2022. This results in a compound annual growth rate (CAGR) of about 12% annually over that period. Therefore, dividend growth has been relatively rapid and, even more impressively, hasn't seen any significant declines throughout this time.

Investors who have owned the company's stock for several years will be pleased with the dividends they have received. Over the past five years, Target has experienced EPS growth of 21% annually. Due to the company's high growth in earnings and low payout ratio, it has the potential to become a top dividend stock.

Target has grown its dividend over the past 50 years. The company increased its regular dividend by 3% compounded annually, or from $2.36 per share in fiscal 2017 to $2.70 per share in fiscal 2021. When the current quarterly dividend is annualized, it amounts to 4.32 dollars per share and yields 2.99%.

Dividend Yield

Target (TGT) Dividend Yield

Target (TGT) Dividend Yield

Target has been distributing quarterly dividends to its investors since March 9, 1973.

In comparison to the 0.8% median dividend yield for the Retailers and Discount Stores industry as of December 20, 2022, Target Corporation has a relative dividend yield of 3.0%. The dividend yield for Target Corporation was 1.3% in 2016.

Target has distributed quarterly dividends of between $0.06 and $1.08 per share since March 9, 1973. The dividend yield for Target Corporation has been 2.7% annually on average for the previous five years.

Target also has a share buyback program in addition to paying dividends. The business invested $7.3 billion over the previous 12 months, giving shareholders a staggering 9.67% yield. Investors believe the company's decision to cut or discontinue paying dividends is unlikely.

Future projections indicate that profits per share will increase by 24.4% over the following year. The payout ratio will reach 25% by the following year if the dividend stays on this course, which is a level that can be sustainable moving forward.

Dividend History

Target (TGT) Dividend History

Target (TGT) Dividend History

Target has a long history of dividend payments to its stockholders. Since its IPO in 1967, the firm has consistently paid dividends; throughout time, it has also regularly increased those payouts.

The company's board of directors decides the specific payment dates, and Target's dividends are typically paid out every quarter. The majority of the firm's dividends are paid in cash, though occasionally, the company may elect to pay dividends in terms of stock or other instruments.

The company's current annualized payout of $4.32 is up 20% over the previous year in dividend growth. Target has raised its dividend five times in the last five years on a yearly basis, for an average annual rise of 6.05%.

Future dividend growth will be based on the company's payout ratio, which is the percentage of annual earnings per share that is distributed as a dividend, as well as both earnings growth and the payout ratio. Target's payout ratio at the moment is 27%, meaning the company paid out 27% of its trailing 12-month EPS as a dividend.

Dividend Sustainability

Strong dividend returns are excellent, but they only truly benefit us if the payout is enduring. Target was making enough money to comfortably cover the dividend as of the most recent payment. However, the cash payout ratio of 78% indicates that most of the money is going back to shareholders, which could limit future growth potential even though the company is producing enough to make the dividend practical.

EPS is anticipated to increase by 19.2% over the following year. If the dividend follows the current course, we predict the payout ratio will be 26%, which is within the parameters that give us confidence in the dividend's sustainability.

Target has a reputation for relying on luxury items to boost its sales. Apparel, cosmetics, furniture for the home, and other durable goods account for about 80% of sales. Unlike Target, Walmart sells a lot of food, which accounts for around 56% of its total revenue.

This helps to explain why Target saw such a significant increase in sales volumes during the pandemic as individuals went to stores to purchase various sports equipment, home goods, and cosmetics as they were compelled to keep themselves occupied at home. It will be fascinating to monitor how Target's stock price and dividend payments change if there is a recession or downturn in the economy going forward.

As we can see, dividend payments have been going up at an unprecedented rate and haven't slowed down. This gives us confidence that future payments will also be reliable.

Target (TGT) Dividend Sustainability

Target (TGT) Dividend Sustainability

Cash Flow Analysis of Target (TGT)

Target (TGT) Cash Flow Analysis

Target (TGT) Cash Flow Analysis

Target net cash flow is constant compared to last year. Target recorded a net cash flow of 1.36 billion dollars in 2021, or cash and cash equivalents gain. In contrast to Net Cash Flow Business Acquisitions and Disposals, which is forecast to decrease (23.6 million) in 2022, Net Cash Flow Investment Acquisitions and Disposals is predicted to increase to around 97.9 million.

Before investing in Target, dividend investors should consider several factors, including the company's lack of cash flows. Even though the dividend is currently looking good, cash flow makes us apprehensive about the possibility of future reductions. Going forward, this could be an excellent dividend stock, but we should point out that the payout ratio has been higher.

If you are a value investor, you are expected to emphasize the reliable cash flow from your liquid investments. Bond interest, interest from various sorts of investments, and, of course, dividends provide cash flow. Investors frequently judge a dividend by its dividend yield, which expresses the dividend as a percentage of the stock price at the time it is being considered for purchase.

Debt Analysis for Target (TGT)

Target (TGT) Debt Analysis

Target (TGT) Debt Analysis

Target's total debt, which includes both short- and long-term debt, has remained constant over the past year at about $12,749.0 million. It has $2,512.0 million in short-term investments and cash on hand, which it can use to reinvest in the company at this level of debt.

Furthermore, during the same period, Target earned $5,436.0M in operating cash flow, culminating in an operating cash-to-debt ratio of 42.64% and indicating that Target's present level of operating cash is sufficient to cover the debt.

In addition to return on assets, this ratio might indicate operational efficiency. Given the number of current assets ($11,990.0M) and current liabilities ($12,708.0M), the company is unable to satisfy its obligations, and its current ratio of 0.94x is below the sensible threshold of 3x.

Given that its total debt exceeds its equity, Target is a highly leveraged corporation. This is common among large-cap corporations since debt can frequently be a less expensive option than equity due to interest payment tax deductions. The cost of capital is typically cheaper for large-cap companies since they are perceived as safer than their smaller counterparts.

Target (TGT) Debt/Equity Analysis

Target (TGT) Debt/Equity Analysis

Should You Invest in Target (TGT) Considering Its Outstanding Dividend Payouts?

As mentioned, shareholders who have held Target stock for a while will be satisfied with the dividend payments received. The fact that Target has increased earnings per share at a rate of 21 percent annually over the previous five years provides us with optimism. Given the company's high growth rate in earnings and low payout ratio, it can be a fantastic dividend investment.

Dividends are popular among investors for various reasons, including tax benefits, a reduction in overall portfolio risk, and much higher stock investment returns. It's crucial to remember that not all businesses offer a quarterly payout, and Target checks many boxes when it comes to dividends except for the yield. TGT is a fascinating investment opportunity in light of this.

As was previously mentioned, while the payments are on track on the majority of fronts, their lack of cash flow may eventually prove problematic. This seems like a nice dividend stock in the future, but we should point out that the payout ratio has previously been greater.

Despite numerous challenges, Target is still one of the top retailers in the industry. Target's management is probably willing to go to any lengths to maintain the company's desired Dividend Aristocrat status.