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Most companies resorted to various cost-containment measures to counter the liquidity crisis, when the pandemic gripped the economy. These include pay cuts or furloughs, curtailing capital expenditures, and even halting share repurchases or pulling back dividends. More than a year later, things are looking up courtesy of swift vaccination drive and stimulus package. Market pundits are of the opinion that resumption of normal business activities could pave the way for dividend hikes and share buybacks this year. Well, for now investors have some good news from Target Corporation TGT.
This general merchandise retailer has announced an increase in its quarterly dividend. Impressively, the hike marked Target’s 50th successive year of dividend increase. The company’s board of directors raised the quarterly dividend by 32.4% to 90 cents a share, which is payable on Sep 10, 2021 to shareholders of record at the close of business on Aug 18, 2021. Last year in June, the company increased its regular quarterly dividend by 3% to 68 cents.
The latest dividend increase brings its annualized dividend to $3.60 per share compared with the prior rate of $2.72. The hike reflects the company’s dividend yield of 1.6%, based on its closing share price of $231.94 on Jun 9. Its third-quarter dividend will mark the company’s 216th straight dividend payment since October 1967.
Impressively, this Minneapolis, MN-based company is among those handful of companies that continued to reward shareholders even amid the crisis. Backed by sound fundamentals and robust financial strength, Target has time and again highlighted its commitment to enhancing shareholder value. The current hike reflects strong cash flow generation capability driven by better execution of operating plans.
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Impressively, Target recommenced share buyback in the first quarter of fiscal 2021. The company repurchased shares worth $1.2 billion, thereby retiring 6.1 million shares at an average price of $190.77. At the end of the quarter, the company had roughly $3.4 billion remaining under its share-buyback program approved in September 2019.
We note that shares of this Zacks Rank #1 (Strong Buy) company have advanced approximately 29.8% in the past three months compared with the industry’s rally of 11.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
What Else You Should Know?
Target has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape. The company, which is among the biggest winners amid the pandemic, has been deploying resources to enhance omni-channel capacities, including same-day delivery of in-store purchases and fast track technology improvements.
To accelerate industry-leading capabilities, the company plans to make an investment of about $4 billion annually during the next several years to ramp up store openings and remodels, scale up fulfillment services and enhance supply chain capabilities, keeping in mind speed and convenience.
Undeniably, Target has been aggressively adopting strategies to provide seamless shopping experience through miscellaneous channels. We note that same-day services (Order Pick Up, Drive Up and Shipt) grew more than 90% during the first quarter of fiscal 2021. Sales fulfilled by Shipt were up nearly 86% year over year and sales through Drive-Up were up 123% during the quarter under review. Order Pickup rose 52% in the quarter.
Thanks to its one-stop shopping destination, customers opted Target amid the pandemic for its multi-category assortment of owned and exclusive brands as well as popular national brands. Impressively, Target is always striving to build on its partnerships, especially with popular and high-profile brands like Apple, Ulta Beauty and Levi's.
3 More Stocks Hogging the Limelight
Burlington Stores BURL has a trailing four-quarter earnings surprise of 74.7%, on average. The stock sports a Zacks Rank #1.
Boot Barn Holdings BOOT has a trailing four-quarter earnings surprise of 51.7%, on average. The stock flaunts a Zacks Rank #1.
Walmart WMT has a trailing four-quarter earnings surprise of 17.8%, on average. The stock carries a Zacks Rank #2 (Buy).
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