Wednesday, July 2, 2014

Target Corporation (TGT) Addition to Stocksnowball Portfolio


This is my third time writing or making a video about Target Corporation (TGT). Last time was on December 18, 2013. 

My transaction history:

Bought on January 2, 2012 for $58.04
Sold on March 4, 2013 for $65.85

Bought on December 17, 2013 for $61.55
Sold on March 7, 2014 for $60.68       (updated real-time on Stocktwits follow me

Bought on July 2, 2014 for $58.70




Company: Target Corporation
Symbol: (TGT)
Industry: General Merchandise Store
My Opinion: Dividend, Value, Dividend Growth

Where did I come up with the idea to invest in TGT? This is a multi-year analysts of mine. I find that this company has untapped value. It just needs a good management team in place like any company. The new CEO may not be the longterm answer. The company is doing reasonably good with weak management because of the brand and business model.

Stock performance has been terrible compared to the S&P500 this can be positive or negative depending on your outlook. I tend to look at it in a positive light because your dividends are working harder when using DRIP to accumulate shares and potential to outperform if the company improves.

The price has followed some of the high profile negative media coverage the company has received from the data breach and Canadian expansion efforts. This is in a market where all companies have been given the benefit of the doubt TGT has managed to lose trust.

The first main issue was the data breach. Target has insurance for this but losing goodwill of the customers is hard to calculate but they are teaming with MasterCard and started the chip-enabled card readers to help boost security. They are also spending $5 million on cyber security upgrades.

The second issue is the Canadian expansion has been down right terrible the man in charge of Canadian operations was let go. This is a drag on shares as margins are not even close to U.S. stores.

Dividend:
Dividend $2.08 (.52 qtr)
Current Yield 3.5%
Next Ex-dividend date is 8/18/2014
Pay date 9/10/2014

The best part of company execution right now is their dividend policy. The company has consistently raised dividends for 46 straight years and is a Dividend Champion! Most recent raise just announced from .43 qtr to .52 qtr. If you compare that to Wal-Mart (WMT) and its 2% raise TGT is far superior. AMZN and COST are also competition but not when it comes to dividends.

Price and Valuation:
As of the July 1 2014 market close $58.37
52 week Range $54.66-$73.50
Last 7 years
Normal P/E Ratio 14.3
Current P/E Ratio 17

Over a longer time horizon TGT has had a P/E around 19. The last 7 years it has slowly come down. It is slightly overvalued to the GDF or earnings line currently on fastgraphs.com.

Conclusion:
This is another company that is paying you to wait while the expansion in to Canada is fine tuned. Is there still value? Yes, the company makes a good amount cash-flow and has a dividend coverage ratio of 2.3x. I think when compared to its peers and competitors the current price gives value moving forward. We are long today at $58.70

Thanks for reading and feel free to comment!

DSF


Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

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