Target Corporation: Is TGT a Value Stock?
Can TGT Stock Reward Investors?
Looking for high-quality companies with attractive valuations is quite difficult with indices trading at all-time highs. And finding an investment which offers a high dividend yield and great value is even more difficult than that. Today’s article will focus on an investment opportunity that is all of the above: Target Corporation (NYSE:TGT).
Before looking into TGT stock’s valuation and dividend, consider its strong and predictable revenue–the lifeline of the business. The amount of revenue accounted has been on an upward slope year after year, which every investor likes to see. Such increases will also prevent large volatility in the stock’s daily price movement.
When comparing one investment to another, ignore their prices. What I mean is that you shouldn’t chase the stock with the lower trading price simply because you can afford more shares. Rather, purchase a stock with a cheaper trading multiple based on the company’s annual earnings and its price-to-earnings (P/E) ratio.
As regular readers are aware, this ratio is calculated by dividing the current trading price by the company’s annual earnings. The lower the ratio, the greater the discount. This ratio is best used for comparisons, as it ignores every company’s market size and share price. so below is a table with the P/E ratios for TGT stock and its main competitors:
|Company Name||Stock Ticker||Price-to-Earnings (P/E)||Market Cap Size (Billions)||Share Price|
|TJX Companies Inc||TJX||20.2x||$45.70||$70.88|
|Burlington Stores Inc||BURL||26.2x||$5.90||$81.87|
|Wal-Mart Stores Inc||WMT||18.2x||$244.00||$81.34|
|Big Lots, Inc.||BIG||13.7x||$2.20||$50.61|
If TGT stock were to be purchased, $11.60 would be received for every $1.00 of earnings. In comparison, shareholders of Burlington Stores Inc (NYSE:BURL) would be faced with more than double the valuation. Even compared to Wal-Mart Stores Inc (NYSE:WMT), the largest retailer in the world and a company with a very similar business model, Target stock is still trading at a cheaper valuation.
Get Paid to Wait
TGT stock pays a quarterly dividend, traditionally in March, June, September, and December. The current dividend is $0.62 per share and the stock is trading at $55.94.
The reason why Target stock is classified as a dividend growth stock is because of its current 4.48% yield. If this doesn’t sound like a big deal, think again, because TGT stock’s yield is 2.34 times greater than the S&P 500 Index–the largest 500 companies trading on U.S. exchanges.
To make things even more appealing, TGT stock enjoys a great deal of dividend growth. The current growth streak is 49 years, meaning at least one dividend hike per year since 1968.
There is a high possibility that this trend of growth in the dividend continues. Besides the strong and predictable revenue growth mentioned earlier, it’s also possible because approximately half of Target’s earnings are paid out via the dividend, with the remaining funds, of course, being retained for internal use. This gives the company the ability to increase the dividend without harming the reinvestment back into the business, potentially leading to a larger payout and greater rate of return on capital.
Final Thoughts About TGT Stock
Some investors make decisions based on the products or the services that are offered by a company. However, this strategy could be hit or miss since the revenue may only be recurring for a short period of time. To protect yourself, consider a company with recurring revenue and great value instead. This is why an investment in Target Corporation is appropriate.
Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners
Sign up to receive our FREE Income Investors newsletter along with our special offers and get our FREE report:
5 Dividend Stocks to Own Forever
This is an entirely free service. No credit card required. You can opt-out at anytime.
We hate spam as much as you do.