The decision was made on an opportunity that I felt was staring blank, right into the eye. The opportunity I felt in my gut, came from an analysis I did on a stock over this past weekend. I simply used our dividend screening tool to assess the situation and thought – this fits in and based on past history and valuations currently, I had to pull the trigger.
Target (TGT) – was purchased on Monday the 16th of June (3 days ago). After I did my research I felt it was right – it was time to squeeze and purchase the company’s stock.
The analysis, which largely stemmed from my previous post/analysis, on target:
- Dividend yield: 3.63% at the time, which is higher than the S&P on average, one of our pegs and from our post earlier, is over 150 basis points (1.50%) higher than the 5 year historical average! Also, the trend with the stock price and yield shows that at every increase, you typically will receive the appreciation of the stock down to a more moderate level over the next 12 months, until the next dividend. Love this!
- Payout Ratio: it is below 60%, which we dividend diplomats here love to see. I know Bert and I stay true to this form when it comes to a dividend aristocrat, so I was confident with this.
- Price to Earnings: My analysis at my previous post, showed an approx 17-18 P/E ratio, which is less than the S&P average of roughly 19.32. I was happy with this and felt there was value to be had.
- Dividend Increases: 42 years in a row. Enough said… with a growth rate over the last 3 years of 20%? Sounds good to me. Also to note – last week the company announced an increase of 20.9% from $0.43 to $0.52, cha ching! How do you like that Bert (the other diplomat)?
Highlights with the Company:
- Down approximately 9.7% YTD at the date of purchase due to the next bulletpoints
- Security Breach with Credit Cards, which I feel Target has taken their hits and is now in the past
- Step down of CEO, which I think is a good thing as the board of directors weren’t a fan and some of his plans did not perform as he projected
- Tagging along above, the Canada retail stores haven’t performed as well with what was estimated/projected by management, which has had a pressure on their earnings and price
This total purchase of $2,750 adds $99.84 to my projected annual Dividend Income, which inches me closer to my projected annual dividend income goal of $3,750.
How do you feel about Target? Think this was a good entry point? Think that this dividend is sustainable? Anyone add to their current position? I hope we can enjoy the benefit of their decline in price and continued increase in dividends, thank you for stopping by everyone!
-Lanny