Dividend Investing Dividend Stock Transactions

Recent Buy – Target

As mentioned in the Feb 2016 dividend stock considerations post, we’ve been looking to add some US dividend stocks into our dividend portfolio. The goal is to add a stock or two in the consumer staples and/or consumer discretionary sectors to boost our portfolio allocation in these two sectors. Our exposure to these two sectors is a bit limited right now. While there are a lot of great dividend paying Canadian companies in the financial and oil & gas sectors, the choices are extremely limited when it comes to consumer staples/discretionary sectors. In order to increase our exposure to these sectors we need to look at the US and international markets.

So, we recently made the following purchase:

26 shares of Target Coropration (TGT)

 

Target Corporation (TGT)
Target Corporation is engaged in providing everyday essentials and fashionable, and differentiated merchandise at discounted prices. The Company offers its products through stores, online or through mobile devices. The Company sells an assortment of general merchandise and food through its store and digital channels. Its general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items. Its urban format stores, CityTarget and TargetExpress, offer edited general merchandise and food assortments. Its digital channels include an assortment of general merchandise, including various items found in its stores, along with a complementary assortment, such as additional sizes and colors sold online. The Company’s brands include Archer Farms, Simply Balanced, Boots & Barkley, Circo, Embark, Gilligan & O’Malley, Market Pantry, Merona, Room Essentials, Smith & Hawken, Spritz and Sutton & Dodge. (From Google Finance)

Target currently has a dividend yield of 3.2%, a PE ratio of 15.63, a payout ratio of around 50%, and a debt/equity ratio of 1.1. When evaluating future growth potentials, Target has a solid PEG ratio of 1.42. The company is a Dividend Aristocrats with 48 years of dividend increase streak, a 1 year dividend growth rate of 13.7% and a 5 year dividend growth rate of 20.8%.

The stock price has seen a pull back of over 20% compared to its 52 week high. Since we are purchasing dividend stocks for the run, we like to purchase stocks when there’s at least a 10% pull back. A 20% pullback indicates that this is a great buying opportunity, given the long dividend history and dividend growth rate.

Target has faced a few setbacks the last few years – the credit card hack and the Canadian expansion fiasco to name a couple. Target is trying to set aside these disasters and improving its business by becoming e more efficient at their core competencies. The company is doing this by selling their non-retail operations. At the end of 2015, Target sold their pharmacy and clinic business to CVS Health for approximately $1.9 billion. It’s questionable whether this is a good move as this transaction removed about $500 million in sales for Q4 2015. I do like the idea that Target can now focus on their core competencies of being a retailer; CVS Health can focus on the pharmacy and clinic business within Target stores. The two companies can work closely together to improve customer satisfaction. Moving forward,  Target needs to focus on getting better products and expanding their online platform to beat competitors like Wal-Mart, Costco, and Amazon. The retail space is fierce and competitive but I believe Target has a lot of experience in this space and will continue to excel.

I’m extremely pleased that we now own both Wal-Mart and Target. I’d love to one day add Costco in our portfolio as well. This purchase added $58.24 in our annual dividend income. Using a conservative dividend growth rate of 8% per year, in 15 years the annual dividend income will grow to over $180 if we didn’t purchase more shares. This is why I love dividend growth. 🙂

What do you think about this purchase?

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12 Comments

  • Reply
    Investment Hunting
    February 15, 2016 at 9:11 pm

    I like Target. I made a good gain on this stock in 2014-2015, then sold near the 52-week high. Now that I know it’s down 20%, I’ll take another look. Thanks for sharing.

    • Reply
      Tawcan
      February 17, 2016 at 12:20 pm

      You made some good gain with this stock then. Great stuff.

  • Reply
    Dividend Hustler
    February 16, 2016 at 12:15 am

    Nice purchase Tawcan. It’s nice collecting assets. Retail space is definitely fierce but a couple stocks won’t hurt in our portfolios. Everyone’s gotta eat and shop. Cheers bud.

    • Reply
      Tawcan
      February 17, 2016 at 12:20 pm

      Thanks Dividend Hustler.

  • Reply
    BeSmartRich
    February 16, 2016 at 9:35 am

    Good job. Target is amazing. I own Walmart and it feels great to have it for sure. I always wanted to buy Costco but it always seem being traded at premium. I will have to wait for a bad news. Hopefully soon.

    Thank you for sharing

    BSR

    • Reply
      Tawcan
      February 17, 2016 at 12:21 pm

      Costco is selling at such a premium it’s hard to justify the purchase. I almost pulled the buy trigger a few years ago when the Costco was around $100. Oh well.

  • Reply
    ambertreeleaves
    February 16, 2016 at 12:01 pm

    Looks like a promising purchase.

    When reading the article, it were actually the last few words that got most of my attention: the fact that dividend grows , usually faster than the inflation. I know it is part of DGI, but only now with this article it became crystal clear. Over time, I do want a DGI portfolio… I will look at this while evaluating my DGI strategy.

    • Reply
      Tawcan
      February 17, 2016 at 12:21 pm

      The dividend growth is pretty amazing stuff. 🙂

  • Reply
    Dividend Gremlin
    February 17, 2016 at 8:20 am

    Tawcan,

    Been a shareholder now for over 2 years in both taxed and tax-advantaged accounts. I really like the increases I have seen, the general upkeep in their stores compared to the competition, and their marketing strategies. We visit a local TGT about once a month for a few items that are hard to get or more expensive elsewhere. I must admit I am always impressed with the variety and applicability of their product lines they carry.

    – Gremlin
    Long TGT and WMT

    • Reply
      Tawcan
      February 17, 2016 at 12:22 pm

      Hi Gremlin,

      Good to hear from a happy TGT customer.

  • Reply
    Dividend Monster
    February 17, 2016 at 10:10 am

    Tawcan,

    Target is a great buy, especially because you already have WMT in your portfolio. In the US, these two seem to dominate the retail market when it comes to “one stop shop” stores. This is more true than ever in the midwest states where your choices can be a little limited. I don’t doubt their ability to continue dominating the market but I will admit that Target does make me a little to nervous to jump on their ship because of their cuts of their income that were incurred by selling off their pharma to CVS. Don’t get me wrong, CVS is great and they will do well with it but I think they left a whole lot of money on the table by doing so. I’m keeping my eye on Target to possibly add them to my own portfolio but there are quite a few others ahead of them at this time. I’ll just hold on to WMT as my key retailer until I make my decision on Target!

    Thanks for sharing,

    Dividend Monster

    • Reply
      Tawcan
      February 17, 2016 at 12:23 pm

      Hi Dividend Monster,

      The sale to CVS is a bit concerning as that’s revenue off Target’s plate. But I like the idea of focusing on the retail core and make sure customers are satisfied. CVS can focus on improving the pharmacy business. WMT is a great stock to hold, we’d love to get more in the future.

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