TGT Stock Is a Dividend Aristocrat
Target Corporation (NYSE:TGT) was one of the beaten-down retailer stocks a few years ago. But more recently, the company has been making a strong comeback. Over the past 12 months, TGT stock climbed more than 30%.
The company also has a solid track record of returning cash to shareholders. Target Corporation has made 201 consecutive quarterly dividend payments and has raised its payout in each of the last 46 years. (Source: “Dividend & Stock Split History,” Target Corporation, last accessed March 5, 2018.)
In other words, TGT stock is a Dividend Aristocrat—a title reserved for companies with at least 25 consecutive years of annual dividend increases.
Now, the company is reporting earnings again. Will Target Corporation have more good news for dividend investors?
Well, let’s first take a look at what the stock market is anticipating.
On average, Wall Street analysts expect Target Corporation to grow its total sales by 8.9% year-over-year to $22.53 billion in the fourth quarter of the company’s fiscal year 2017. The bottom line, on the other hand, is expected to decline. The consensus estimate is for Target to earn an adjusted net income of $1.38 per share, which would represent a 4.8% decrease from the $1.45 per share earned in the year-ago period. (Source: “Target Corporation (TGT),” Yahoo! Finance, last accessed March 5, 2018.)
Stats on TGT Stock
| Analyst EPS Estimate | $1.38 |
| Change from Year-Ago EPS | -4.8% |
| Revenue Estimate | $22.53 Billion |
| Change from Year-Ago Revenue | 8.9% |
| Earnings Beats in Past 4 Quarters | 3 |
(Source: Ibid.)
Dividends come from profits. If a company can’t generate a growing stream of profits, it likely won’t be able to keep raising its dividends.
So does that mean TGT stock won’t be able to continue its dividend increase track record?
Not really.
You see, despite slowing profits, Target still has more than enough resources to cover its payout. In the first nine months of its fiscal year 2017, the company generated adjusted diluted earnings of $3.34 per share. Considering that Target declared total dividends of $1.84 per share during this period, it achieved a payout ratio of 55%. (Source: “Target Reports Third Quarter 2017 Earnings,” Target Corporation, November 15, 2017.)
Such a conservative payout ratio leaves plenty of room for future dividend hikes. At the same time, Target would want to continue its dividend increase track record. Think about it; if a company has been raising its payout for a decade and that streak suddenly stops, management will likely have some serious explaining to do.
Target is set to report earnings on Tuesday, March 6 before the market opens. An earnings beat would give the market a reason to keep the upward momentum continuing in TGT stock. However, because the company’s board of directors usually reviews its dividend policy in June, investors will likely have to wait a few more months before TGT stock announces its 47th consecutive dividend increase.