Target Shrugs Off Coronavirus Fears, Hikes Dividend by 3%
Amid the coronavirus uncertainties, Target Corporation TGT cheered investors by paying them higher returns. The company announced a 3%-dividend hike, paying out a quarterly dividend of 68 cents a share from the prior payout of 66 cents. The latest dividend is payable Sep 10, 2020, to shareholders of record as of Aug 19.
Impressively, the hike marked Target’s 49th successive year of dividend increase. The latest dividend increase brings its annualized dividend to $2.72 per share versus the prior rate of $2.64. The hike reflects the company’s dividend yield of 2.3%, based on its share price of $118.01 on Jun 11. Its third-quarter dividend will mark the company’s 212th straight dividend payment since October 1967.
We note that Target paid out dividends of $332 million and repurchased shares worth $609 million during the first quarter of fiscal 2020. The company had $4.5 billion remaining under its $5-billion share-buyback program approved in September 2019. However, on Mar 25, management informed that it has suspended its share-buyback plan as part of its efforts to preserve financial flexibility amid the crisis. Notably, Target’s operating cash flow surged roughly $1 billion from the last-year period. It ended first-quarter fiscal 2020 with cash and cash equivalents of $4,566 million, which reflects a sequential increase of about 77%.
What Else to Know?
Shares of this Zacks Rank #3 (Hold) company have increased 16.9% compared with the industry’s 9.2% growth over the past three months. Strength in omnichannel capabilities, its cost-reduction strategy and rationalization of supply chain with same-day delivery of in-store purchases bode well for Target. Management has been aggressively adopting strategies to enhance the shopping experience through miscellaneous channels. It is well equipped to serve shoppers, be it with curbside pickup or delivery at home. It also continues to emphasize on developing flexible format stores to penetrate deeper into urban areas.
Target reported a stellar performance in first-quarter fiscal 2020, wherein both top and bottom lines beat the Zacks Consensus Estimate and revenues grew year over year. During the quarter, same-day services (Order Pick Up, Drive Up and Shipt) grew 278% and accounted for roughly 5 percentage points of total comparable sales growth. Notably, earnings marked its fifth straight beat and comparable sales increased for the 12th successive quarter. Comparable sales for the quarter increased 10.8%.
Key Picks in Retail
Sprouts Farmers Market SFM has a trailing four-quarter positive earnings surprise of 37.2% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SpartanNash SPTN, also a Zacks Rank #1 stock, has a positive earnings surprise of 76.3% for the last reported quarter.
Dollar General DG has a long-term earnings growth rate of 12.4%. Currently, it carries a Zacks Rank #2 (Buy).
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