Lanny’s Recent Purchase – Target (TGT)

 We all knew I couldn’t wait too much longer to make a purchase.  The stock market has continued it’s wild trajectory, but I was able to strike a big name company when they were starting to climb back up.  Yes, I was able to shoot my bow and arrow at the “Red Bullseye” in one of everyone’s favorite US retailers in Target corporation (TGT).  Very excited and let’s find out why I bought it, the price points and the metrics! 

Target Corporation (TGT)

target

Target (TGT) is one of the biggest retail corporations out there.  When it comes to shopping – I hear – oh Walmart (WMT) or TGT.  Now, individuals go there for all types of needs – clothes, food, toys, cosmetics, medicine/prescriptions, you name it and you can do it at TGT.  Additionally, we performed a stock analysis wayyyy back in December of 2015 or 6 months ago, which a lot has changed since then… aka price decline and an increase to their dividend – the double bagger!  Additionally, this is one of Bertie’s 5 always buy stocks when he is looking for a company to buy, however, he hasn’t pounced on them just yet, you got this Bert!  Don’t worry, I am sure he’ll grab some once his feet land back on the ground as he had an incredible wedding week, which he wrote about earlier.

Now… why did I purchase?  This was easy.  They are a dividend aristocrat.  At the time I did the stock Analysis in December, they were trading at over $71, and we all know they dipped slightly into the upper-mid/upper $60’s (66-69).  I thought this was interesting, AND they just had a dividend increase, only for the stock to decrease slightly afterwards.  Here we go with the metrics:

1.) Price to Earnings (P/E) Ratio: I purchased the stock at $67.35 this time around, which based on future earnings of $5.14, gave me a P/E of 13.10  This shows signs of undervaluation against the index and their peers, I was happy to see this below 15 going forward.

2.) Dividend Yield: at the price point of $67.35 with a NEW dividend (as they increased late this past week) of $2.40 – a yield at 3.56%, a point that TGT hasn’t been to in quite some time.  In fact, their 5 year dividend yield average is 2.60%.  Therefore, we are talking a full percent higher almost.  Loving it.   (see Why I compare the yield to the 5 year average)

3.) The payout ratio:  Based on those future earnings, the payout ratio calculated out to be 47%.  This is smack dead in the middle almost and I have recently wrote why the payout ratio is one of the most important metrics for a dividend investor for sustainability

4.) Dividend Growth Rate:  After increasing their dividend for the 45th straight year, the 5 year dividend growth rate stands at 15% and the 3 year at 11.92%.  It was solid in the earlier 2010 years, and the last 2 years have been fairly consistent, similar to Johnson and Johnson (JNJ), at 7.6% last year and a 7.1% growth this year. Very solid DGR, I still do love my dividend growth rate.

5.) Shares outstanding: This is even better.  From March 2015 to March 2016, TGT has been on a share buy back spree, and have decreased shares outstanding by a whopping 7%!  I always will agree that share buy backs are big for dividend investors, as management has the ability to either keep earnings growth, open up more room for dividend growth and/or could be management’s best return on their investment as well.

This purchase, all in all, fits the mold of where my goals for 2016 was leaning towards.  I do not believe this company will keep me up at night, with $40B in market capitalization, they are one of the most well known retailers in the country, and the lady LOVES spending all day in their stores.  Further, they have the Starbucks (SBUX) cafe shops on the inside – I know too many people who love to grab a coffee and walk around to browse, it’s a little “getaway”, I guess? haha

Target (TGT) Stock Purchase Summary:

Without further ado, here is the summary of my stock purchase.  I bought 30 shares of Target Corporation (TGT) at $67.35 triggered by a limit order trade (Expense = 0.34% for trade).  Total Price: 30 X $67.35 + 6.95 = $2,027.45.  Total dividends added to my annual income based on purchase of TGT = 30 X $2.40 = $72.00 added per year or $18.00 per quarter going forward. One downside is I did not make a more than $3,000 large investment purchase, as the well has been dryer than usual lately, but I wanted to strike while I saw a great price for a great company.  This helps me strive towards my annual portfolio goal and I jumped my position from 50.9068, to a total of 80.9068 now.  Therefore, my next dividend will be $48.55… Pumped.  Looking forward to seeing my dividends reinvest and pick up almost 3 new shares per year, pending the stock price.

I believe I did see quite a few Target (TGT) stock purchases over the last few weeks.  Anyone else buy after the div increase?  What else are you purchasing?  Seeing other attractive companies in the ever-so-unpredictable stock market?  Mr. Market definitely doesn’t know what direction it wants to go on a daily basis, but YTD the market is up quite a bit as a whole.  Bah… NO!!!! haha.  It’s okay, we will strike when we can on companies we conclude to be undervalued.  Thanks everyone, excited to hear back!

-Lanny

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22 thoughts on “Lanny’s Recent Purchase – Target (TGT)

  1. Not to mention every Target now has a CVS pharmacy inside. So does CVS pay rent or percentage of sales? any ideas?

  2. My eyes are on CAH, CMI, DIS, and TGT at the moment. I may be able to pull the trigger on CAH and TGT later this week

    • IH,

      Jealous… you may be able to get it below $67, you punk! Joking.. I may have to buy some more too if they stay at relatively low levels. Especially if they near that 3.6-3.75% yield level…. dayum! Keep us posted please!

      -Lanny

      • I got in at $66.05. I was hoping for under $66, but my order was automatic at market open yesterday. I’m happy with the price though.

  3. Great purchase I will also be buying TGT this week, they are just far too cheap right now! They are undervalued but that makes a great yield for us. Not to mention their ex-dividend date is in 3 days! Recently bought some GILD as well, think this is another undervalued stock.

    • Stefan,

      You stink!!! That means you are getting them better/at a lower price then me! Kidding, kidding, PUMPED you are getting in there, LETS GO!!!! Keep us posted, please! This is awesome, big red owners.

      -Lanny

    • Agent Dividend,

      Thank you very much! It’s been a few years since I scooped up some TGT, and the time was perfect. Hey, if it is discounted a few more, I’ll see if I can round up more capital to grab again! Fingers crossed, of course. Hopefully you can save some capital and deploy it when you can!

      -Lanny

    • BII,

      It’s okay about your purchases – YOU ARE purchasing and that is what matters, I love that, and that’s what matters. Exactly… the return and kickback from money being spent there is always a plus. The girlfriend has a Red card, shops there at least once per week and loves spending time even just looking at the items. Parking lot is always full. Great sign.

      -Lanny

  4. Yep just bought me another load of shares as well. My weekly buy summaries shows they are popular amongst many bloggers these days and its easy to see why as you pointed out above. I am going in slow though as I think they may stay in this range for a while, but the market will do what it wants so we will see.

    • Adam,

      NICE. I am debating about buying more, since they dropped another buck and change since I’ve purchased aka still on my list! And yes – I think it’s been a popular buy lately. I am pumped that it is down, and I think the company is great, bottomline. haha.

      -Lanny

  5. What are your thoughts on TGT’s high debt to equity ratio? I’m very interested in this stock for the yield and the recent dip but the high debt has kept me from taking action.

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