Target (NYSE:TGT) Is Increasing Its Dividend To $1.12

Target Corporation (NYSE:TGT) will increase its dividend from last year's comparable payment on the 10th of September to $1.12. This will take the dividend yield to an attractive 3.1%, providing a nice boost to shareholder returns.

See our latest analysis for Target

Target's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Target's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 23.1% over the next year. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Target Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $1.72, compared to the most recent full-year payment of $4.48. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Target Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Target has seen EPS rising for the last five years, at 9.2% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Target's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Target that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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