Investigating the Sustainability of Target Corp's Dividend Payments
Target Corp(TGT, Financial) recently announced a dividend of $1.1 per share, payable on 2024-03-10, with the ex-dividend date set for 2024-02-20. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Target Corps dividend performance and assess its sustainability.
What Does Target Corp Do?
Target serves as the nation's sixth-largest retailer, with its strategy predicated on delivering a gratifying in-store shopping experience and a wide product assortment of trendy apparel, home goods, and household essentials at competitive prices. Target's upscale and stylish image began to carry national merit in the 1990s—a decade in which the brand saw its top line grow threefold to almost $30 billion—and has since cemented itself as a top U.S. retailer. Today, Target operates over 1,900 stores in the United States, generates over $100 billion in sales, and fulfills over 2 billion customer orders annually. The firm's vast physical footprint is typically concentrated in urban and suburban markets as the firm seeks to attract a more affluent consumer base.
A Glimpse at Target Corp's Dividend History
Target Corp has maintained a consistent dividend payment record since 1972, distributing dividends on a quarterly basis. The stock is thus listed as a dividend king, an honor that is given to companies that have increased their dividend each year for at least the past 52 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Target Corp's Dividend Yield and Growth
As of today, Target Corp currently has a 12-month trailing dividend yield of 2.91% and a 12-month forward dividend yield of 2.94%, suggesting an expectation of increased dividend payments over the next 12 months. Over the past three years, Target Corp's annual dividend growth rate was 15.10%. Extended to a five-year horizon, this rate decreased to 9.40% per year. And over the past decade, Target Corp's annual dividends per share growth rate stands at 9.30%.
Based on Target Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Target Corp stock as of today is approximately 4.56%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-10-31, Target Corp's dividend payout ratio is 0.55.
Target Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Target Corp's profitability 8 out of 10 as of 2023-10-31, suggesting good profitability prospects. The company has reported net profit in 9 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Target Corp's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Revenue is the lifeblood of any company, and Target Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Target Corp's revenue has increased by approximately 15.70% per year on average, a rate that outperforms approximately 82.99% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Target Corp's earnings increased by approximately -2.00% per year on average, a rate that outperforms approximately 21.81% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 13.40%, which outperforms approximately 58.05% of global competitors.
Next Steps
In conclusion, Target Corp's consistent dividend history, attractive yield, and growth rates paint a promising picture for income-focused investors. The company's prudent payout ratio and solid profitability rank underscore its ability to sustain dividend payments. Moreover, Target Corp's robust growth metrics indicate a healthy financial trajectory, further reinforcing the likelihood of continued dividend increases. For investors seeking to enhance their portfolios with dividend-yielding stocks, Target Corp represents a compelling option. As always, it is advisable to conduct thorough research and consider individual investment goals before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
