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Target Corporation Dividend Stock Analysis

Dividends4Life profile picture
Dividends4Life
42.98K Followers

Summary

  • Target Corp. operates nearly 1,800 Target, SuperTarget and CityTarget general merchandise stores across the U.S.
  • TGT has produced fairly consistent earnings and cash flows over the last decade.
  • The announcement to exit Canada was made less than two years after entering the market after a comprehensive review and determined that the business would not be profitable before 2021.

Linked here is a detailed quantitative analysis of Target Corporation (NYSE:TGT). Below are some highlights from the above linked analysis:

Company Description: Target Corp. operates nearly 1,800 Target, SuperTarget and CityTarget general merchandise stores across the U.S.

Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:

1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number

TGT is trading at a discount to only 1.) above. When also considering the NPV MMA Differential, the stock is trading at a 74.4% discount to its calculated fair value of $293.89. TGT earned a Star in this section since it is trading at a fair value.

Dividend Analytical Data In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:

1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%

TGT earned one Star in this section for 3.) above. TGT earned a Star for having an acceptable score in at least two of the four Key Metrics measured.

Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4-year period over the last 10 years (2005-2008, 2006-2009, 2007-2010, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1965 and has increased its dividend payments for 47 consecutive years.

Dividend Income vs. MMA: Why would you assume the equity risk and invest in

This article was written by

Dividends4Life profile picture
42.98K Followers
My entire career has been spent in industry within the finance and accounting realm. My career started in 1985 and has included exposure to implementing SFASs

Analyst’s Disclosure: The author is long WMT. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (13)

positivethoughts profile picture
Target couldn't get stock on shelves in Canada and didnt understand Canadians wanted competitive pricing with Walmart.

I'll pass on Target.
N
I don't think Target needs to "understand Canadians" to be a successful company going forward. They were smart enough to realize that market does not fit their business model and pulled away quickly.
This is a dividend aristocrat stock but it is a little on the high side right now.
Agree with the author on the HOLD stock.
Robert Allan Schwartz profile picture
"They were smart enough to realize that market does not fit their business model and pulled away quickly."

How much shareholder money did TGT waste while they were getting "smart enough"? :-(
positivethoughts profile picture
5 billion wasted.

Easy to please canadians. Put stock out on the shelf and offer value pricing, as does Walmart.
Dividends4Life profile picture
All: As noted in the disclaimer:

"The above quantitative stock analysis, including the Star rating, is mechanically calculated and is based on historical information. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true."

If TGT raises its dividend at 20% a year for the next 20 years, it would be worth $293 per share.

All of my metrics are calculated based on history. This removes subjectivity from the calculation and allows me to compare multiple companies, over industries.

I don't believe TGT will raise its dividend by 20% a year for the next 20 years, so I am not loading up on it at this time.

Best Wishes,
D4L
RoseNose profile picture

To say $293 NPV MMA differential price in the fair value section is not what I want to know about Now. It would have been far more meaningful, at least to me to state what you might calculate the FV to be NOW, since it is trading below that and you rate it 1 *. Not 20 years from NOW. I am sure you know of what you speak and write, but it is NOT clear to me and is a lot of calculations may beyond what I desire to know. This is why I do not follow you. IMO: Rose.
The Benjamin Fund profile picture
At $293, the price would have to quadruple! At that price, the P/E would be well north of 100.

And that's what you consider to be fair value???
m
I like WMT, TGT and COST. They appeal to different types of customers, financially.

Cliff
Hardog profile picture
Maureen

yes copy that. Also there are more TGT than COST, we don't have the latter.
f
Think I'll stick with COST. They didn't just lose $2B in Canada, they just repatriated $2B from Canada. Looking forward to the $5 a share special dividend in addition to the normal dividend.

If TGT hits $200+ per share, COST will probably be north of $500 per share.
theWayissimple1111 profile picture
the stock is trading at a 74.4% discount to its calculated fair value of $293.89.

What???
1978TransAm profile picture
Mpyre - that caught my eye too. If it goes to $293.89 I'll be able to retire real soon.
P
not in the year 2015 is fair value @ $293.89. maybe in the year 2055 ? ?
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