Latest Stock Purchase 6/16/14

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.

tgt

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

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14 thoughts on “Latest Stock Purchase 6/16/14

  1. I am also stockholder of Target and my entry level was a bit higher, so I believe that this stock should recover in future.

    However from my point of view, there are still some negative issues with this stock:
    Price to Free Cash Flow (TTM) is 53,78 – way too high from my point of view
    Free Cash Payout (TTM) is 151,08% – way too high than 50% what I see

    So based on latest results I wouldn’t buy this stock.

    I understand that these results are explainable, but buyer should really believe in quick recovery of the company, otherwise dividends have high chance of being cut.

    • Andrius,

      Nice to see you as a holder as well! I’m curious if you’re intro price was high – why not dollar cost average? If you wouldn’t buy the stock now – why are you holding? Moreso just curious to see your standpoint as an investor in TGT. Do you hold because of the dividend or do you hold because your entry was slightly higher? Would love the feedback.

      I do believe in a quick recovery – they attacked the breach in a very hast fashion and are eagerly trying to improve the management side as well. Dividends always stand a chance of being cut – I agree, we shall see if TGTs earnings stay strong. Thanks for the post and visiting!

      -Lanny

      • Dear Lanny,

        At the moment I need to increase my portfolio to more different companies, so I’m not investing into shares more than once until I have invested into some 50 companies.

        I’m not selling it as I believe that it will manage to solve it’s problems in future. Also I’m more buy and hold investor, so I sell at very rare cases.

  2. Wow… another TGT stock purchase. I can’t believe how popular TGT has become this month as so many FI and dividend blogs have stated their purchases of TGT. I’m still not behind TGT as I see retailers in general facing severe long term headwinds. Still, thanks for sharing!

    • DH,

      Yep.. another TGT purchaser here! I think for me it was a simple choice with the long-term history of tgt (42years of dividends) and during a turmoil time – I dont think they would have increased this past dividend so much if they couldn’t “afford” it. I do see your standpoint with retailers facing strong headwinds, I think this is where brand and customer loyalty start to poke through. Honestly, they aren’t that expensive in comparison to grocery stores near me and I would say 4 times out of 5 they are cheaper on most items, but with quality and far superior quality than to WMT. Thanks for the post, we shall see what it brings!

      -Lanny

  3. Lanny,

    Great buy. I like TGT here. I started purchasing shares in the upper $60s and then averaged down twice, with my last purchase around $56 or so. I’d love to pick more shares up but my position is full, as I never intended for TGT to be a big position. However, when value is there you have to take advantage.

    I think the breach will be old news soon enough. The larger headwinds at play, including Canada, are the bigger challenges, but we’ll see how it goes.

    Glad to have you on board as a fellow shareholder!!

    Best wishes.

    • DM,

      Nice work here! I like the averaging down approach – more shares, better price, more dividend income – isn’t that whole sentence right there and process just amazing?

      I agree with the breach – just excited to see what the future holds for TGT. It’s a relatively small position in my overall portfolio – around the 2.75% weighting, so I would be eager to add more if there’s another 5% decline in the price.

      Feels good to be on the TGT team, I may have to stop there to pick up some bread today, we shall see! Thanks again DM for stopping by, hope you’re enjoying the weekend!

      -Lanny

  4. I like the TGT purchase here. I have considered adding them to my portfolio for several months, since the breach actually, but have chosen instead to stick with WMT for my retail exposure. I like WMT’s international efforts more, and the way it is branching out with e-commerce and local markets. TGT’s yield and DGR is very tempting however. JMTC.

    • Thanks MGM!

      The TGT purchase was a solid add and I’m excited for the earnings releases going forward as well as potential “future” dividends. It’s actually up almost $2 in the week I’ve had it, if it dips even further, maybe another 7-10%, I’d consider adding more.

      WMT is also a great stock with a solid yield, strong earnings and are always increasing the dividend, not a bad way to go! I agree about the yield perspective – hopefully TGT can sustain a solid dividend growth, which has been roughly 20% over the last few years on average, but I’d obviously be okay with something much smaller (6-7%+).

      Thanks again for stopping by, lets keep building assets that give us cash flow!

      -Lanny

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