Dividend Stock Wednesday: Target Corp (TGT:NYSE)

Written by The Dividend Guy on April 2, 2008

This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.

Target Corp

As a shareowner of Wal-Mart, I am not looking to add another general merchandise and food discount store to my portfolio. However, as a stock that has a place on the Dividend Aristocrat list I wanted to have a look at it. 25 years of dividend increases is nothing to sneeze at and the people I speak with who visit the store regularly speak highly of it - kind of an upscale Wal-Mart. As a Canadian, we do not have Target stores so I can’t compare or validate this - perhaps my U.S. readers can elaborate on this?

11 Dollars Out of 14

The Company: Target Corp. (TGT-NYSE)

The Company operates large-format general merchandise and food discount stores in the United States, which include Target and SuperTarget stores. It offers both everyday essentials and fashionable, differentiated merchandise at exceptional prices.

Dividend Aristocrat (25+ yrs dividend growth)
 Yes
Dividend Achiever (10+ yrs dividend growth)
 Yes

THE FUNDAMENTALS

Revenue

TGT - RevenueClick to Enlarge

Revenue Scoring

Criteria Scoring
Consistenly Up with No Down Years 1.0
Up Trend with Less Than 2 Down Years 0.5
Choppy with Greater Than 2 Down Years 0.0
My Revenue Score 0.5

Earnings Per Share

TGT - EPSClick to Enlarge

Earnings Per Share Scoring

Criteria Scoring
Consistenly Up with No Down Years 1.0
Up Trend with Less Than 2 Down Years 0.5
Choppy with Greater Than 2 Down Years 0.0
My EPS Score 1.0

TOTAL FUNDAMENTALS SCORE: 1.5

THE RATIOS

Return on Equity

TGT - ROEClick to Enlarge

Return on Equity Scoring

Criteria Scoring
Above 15% for Last 5 Years 1.0
At Least One Year Below 15% in Last 5 Years 0.0
My ROE Score 1.0

Other Ratios

Ratio Criteria Value Score (Pass=1 / Fail = 0)
Debt to Equity Less Than 0.50 1.12 0.0
Payout Ratio Less Than 60% 16% 1.0
Credit Rating BBB+ A+ 1.0
Total Ratio Score
-
-
2.0

TOTAL RATIOS SCORE: 3.0

DIVIDEND DATA
Annual Dividends

TGT - DPSClick to Enlarge

Dividend Scoring

Criteria Scoring
25+ Years of Dividend Growth 1.0
10+ Years of Dividend Growth 1.0
Less Than 10 Years of Dividend Growth 0.0
My Dividend Growth Score 2.0

TOTAL DIVIDEND GROWTH SCORE: 2.0

STOCK VALUATION

Valuation Metric Criteria Value Score (Pass=1 / Fail = 0)
Dividend Yield Cur Yld Greater Than 10 Yr Avg Yld 0.8% 1.0
Div Yld Compared to SPY Div Yld Cur Yld Greater Than SPY Yld 2.4% 0.0
P/E Ratio Cur P/E Less Than 10 Yr Avg P/E 20.6 1.0
Relative P/E Relative P/E Less Than 1.0 0.67 1.0
Price to Sales Less Than 1.5 0.64 1.0
Total Ratio Score
-
-
4.0

Canadian Shareowner’s Association Stock Selection Guide Software Buy Price

Buy Zone
 Maybe Zone
 Sell Zone
 Current Price Rating Scoring (Buy=1.0, Other=0.0)
$39.75 to $52.58
$52.58 to $64.41
$64.41 to $78.25
$49.69
Buy
 1.0

TOTAL STOCK VALUATION SCORE: 5.0

SUMMARY

Points Earned:

11 out of 14 - half points are rounded down to be conservative

The stock is rated HIGH with 11.5 points earned through my analysis of the stock. Target has been a strong performer and is poised to continue. The revenue numbers have been real strong. The most recent EPS growth rate has dropped in comparison to the 10 year average growth rate (4.4% versus 14.4%), so that would be something to watch. However, as a Wal-Mart shareowner, I am not looking to add to this market sector. It was interesting to run through this as I have a real strong competitor to pit Wal-Mart up against when I look at adding to this sector down the road.

Rating Points Required
High 11+ points
Medium 8-10 points
Low < 8 points

Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.

The Dividend Guy does not own shares in TGT


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4 Comments so far

  1. Matt April 4, 2008 11:09 pm

    I can elaborate on this… An upscale Wal-Mat” Hardly That’s like comparing your best local stake house a upscale McDonalds. I only wish you had the opportunity to frequent a local Target and see what you are missing in your community. I think you would see the difference right away and. Don’t get me wrong, Wal-Mart has its place in the market. But the only comparison in my eyes is that the two are both large discount retailers. Other then that everything is different.

  2. The Dividend Guy April 5, 2008 10:08 am

    Hi Matt - thanks for this clarification - I will be in the U.S. soon and will definitely make time for a visit to a Target.

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