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This Dividend Aristocrat Remains Attractively Priced After Releasing 2018 Guidance

Mar. 06, 2018 12:54 PM ETTarget Corporation (TGT)24 Comments
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  • Target recently published its financial results for the fourth quarter and  full year of fiscal 2018.
  • The company missed expectations by a penny on the bottom line, but exceeded revenue expectations by $240 million.
  • Despite a steep run-up in price since mid-2017, Target continues to look attractive given its new 2018 financial guidance.

In our experience, some of the best opportunities in the stock market occur when a high-quality company experiences some sort of temporary trouble. This allows investors to accumulate a position in these excellent businesses without paying a premium price.

Target (NYSE:TGT) was an example of this last year. Due to fears that Amazon (AMZN) and other e-commerce businesses would permanently disrupt its business model, the company traded at absurdly low valuations multiples that - in our view - were not justified given the longevity of the company's business model.

Because Amazon-related fears about Target's future, the markets seemed to forget that Target has hiked its dividend for 45 consecutive years. This makes the company a member of the exclusive Dividend Aristocrats list - a group of elite dividend stocks with 25+ years of consecutive dividend increases. You can see the full list of Dividend Aristocrats here.

Slowly, the investment community began to remember Target's business stability. The company's valuation reverted upwards, generating excellent returns for shareholders who accumulated near the bottom.

Importantly, this was driven by solid fundamental performance from the company. Target's comparable store sales trends improved, and the company's earnings and revenues appear well-positioned to resume growing.

On March 6th, the company reported earnings for the fourth quarter and full year of fiscal 2017. This article will analyze Target's earnings release and determine whether the company is still a buy at current prices.

Financial Performance Summary

Target's fourth-quarter earnings release saw the company beat revenue expectations by $240 million but miss consensus estimates for adjusted earnings-per-share by a penny.

On the top line, Target's fourth quarter sales increased by 10.0% to $22.8 billion (from $20.7 billion last year) which reflects the impact of an additional week in this year's quarter, a 3.6% increase in comparable store sales, and the addition of sales in non-mature stores.

High-quality Dividend Aristocrats like Target are excellent long-term holdings for dividend growth. Buying them when they are undervalued, can provide even better returns over time. This is why we developed our marketplace service Undervalued Aristocrats, where we perform in-depth valuation analysis on all the Dividend Aristocrats and Dividend Champions, which are stocks with 25+ consecutive years of dividend increases. See our full list of recommendations with our service Undervalued Aristocrats, which provides actionable buy and sell recommendations on some of the most undervalued dividend growth stocks around. Click here to learn more.

This article was written by

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Sure Dividend helps individual investors find high quality dividend growth stocks with strong competitive advantages suitable for long-term holding. The authors who write for Sure Dividend on Seeking Alpha are as follows:Bob CiuraBen ReynoldsJosh Arnold

Analyst’s Disclosure: I am/we are long TGT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have 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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