TGT Stock a Buy Even Without Canada’s Help

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Target Corporation (NYSE:TGT) followed its rival Wal-Mart Stores, Inc. (NYSE:WMT) to Canada but couldn’t survive the harsh economic conditions north of the border.

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The Canadian experiment will go down as a failure for Target, ultimately costing billions.

And yet, despite this failure, TGT stock still is up by more than 20% over the past three months, creaming the Dow Jones Industrial Average. Moreover, the analyst community continues to be bullish on Target stock, and I’m on board with that sentiment, too.

Piper Jaffray believes the Canadian exodus is just one more positive on a list of reasons to buy Target stock now. Jaffray has an “overweight” rating for Target, and is one of nine analysts that have listed TGT stock as a buy.

Target has an earnings call set for Feb. 25, and thanks to better consumer confidence and bottom-of-the-barrel oil prices, there’s a good chance the holiday numbers will be epic.

TGT a King Among Dividend Aristocrats

Target is a dividend darling, so if you haven’t been cashing in every quarter for the past 48 years, it’s time to get on the bus.

TGT stock pays a fair 2.7% yield on a 52-cent quarterly dividend — but that’s a payout that has shot up by more than 200% in the past five years.

And with a dividend payout ratio of just 52%, TGT has ample room to improve the dividend while still keeping enough cash on hand to grow the Target brand.

Eyes on the Prize

Target executives continue to push this retail titan to grow smartly. For one, TGT stock should benefit from an increased digital presence — the company recorded all-time high digital sales for November and December 2014, including 40% year-over-year improvements in Black Friday and Cyber Monday sales.

At the same time, Target also is testing out smaller-format stores — its San Diego location, set to open in July 2015, spans just 19,000 square feet, vs. an average size of 135,000 square feet. This type of location should be able to help Target penetrate more urban areas.

The Price Is Right

Analysts on average predict revenues to grow by roughly 2% next fiscal year, but earnings are forecast to explode by nearly 40%. Meanwhile, TGT is trading at 17 times earnings, which is well below an industry average of almost 25.

Bottom Line

Target’s solid dividend history, relative value and commitment to still growing the business in the face of its Canadian failure should cast a bullish light on TGT stock. Hit the buy button on TGT stock today.

As of this writing, Scott Michnick did not hold any interest in the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2015/02/tgt-stock-dividend-aristocrat/.

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