Over the past 10 years Target Corporation (NYSE:TGT) has returned an average of 3.00% per year from dividend payouts. The stock currently pays out a dividend yield of 3.47%, and has a market cap of US$38.53B. Let’s dig deeper into whether Target should have a place in your portfolio. View our latest analysis for Target
How I analyze a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Target fit our criteria?
The company currently pays out 45.57% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 49.54%, leading to a dividend yield of around 3.83%. In addition to this, EPS is forecasted to fall to $5.27 in the upcoming year. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. TGT has increased its DPS from $0.56 to $2.48 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes TGT a true dividend rockstar. Relative to peers, Target produces a yield of 3.47%, which is high for Multiline Retail stocks but still below the market’s top dividend payers.
Keeping in mind the dividend characteristics above, Target is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for TGT’s future growth? Take a look at our free research report of analyst consensus for TGT’s outlook.
- Valuation: What is TGT worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TGT is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.