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Target Is Putting Pressure on Wal-Mart's Dividend

June 14, 2012 | About:

As the world's largest retailer, Wal-Mart (NYSE:WMT) is not used to being the one bullied. Its new competition is not coming from the retail side, but instead it is coming from the financial side. Specifically, Wal-Mart, who has led the way among major retailers in dividend yield, is starting to get some real competition from Target (NYSE:TGT).

Target Corp. operates about 1,700 Target and 250 SuperTarget general merchandise stores across the U.S. June 13, the company increased its quarterly dividend 20% to $0.36 per share. The dividend is payable Sept. 10, 2012, to shareholders of record at the close of business Aug. 15, 2012. The yield based on the new payout is 2.5%. WMT's current yield is 2.4%.

TGT has notched double-digit dividend growth every year since 2005. In addition, better-than-expected results led the company to raise its full-year earnings guidance last month by $0.05 cents ($4.60 to $4.80 per share.) Although TGT is trading below my fair value price of $70.56, I am not ready to buy due to a higher level of debt than I am comfortable with, but I am certainty watching it much closer than I have in the past.

Full Disclosure: Long WMT. See a list of all my dividend growth holdings here.

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