Target Corporation TGT gave investors a reason to cheer by boosting its dividend payout. The shareholder-friendly move reflects this Minneapolis, MN based company’s financial stability and resilience amid a tough retail landscape.
The board of directors of this general merchandise retailer raised the quarterly dividend by 3.1% to 66 cents a share to be paid on Sep 10, 2019. The dividend yield based on the new payout and the last closing market price is approximately 3%. Last year in June, Target had increased regular quarterly dividend by 3.2% to 64 cents a share.
We believe that such hikes not only enhance shareholders’ value but also raise the market value of the stock. In fact, through these dividend increases, companies persuade investors to either buy or hold the scrip instead of selling it. People looking for regular income from stocks are most likely to choose companies that have a track record of consistent and incremental dividend payouts.
Things You Ought to Know
Stock Displays Solid Momentum in Six Months
Target’s growth strategies and sound fundamentals reinforce its position in the fast-changing retail landscape. Notably, shares of this Zacks Rank #2 (Buy) company have advanced 37.3% in the past six months against the industry’s rise of 25.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock has also comfortably outperformed the Retail-Wholesale sector and the S&P 500 Index that advanced 13.3% and 12.2%, respectively, in the said time frame. Further, the stock is hovering close to its 52-week high of $90.39.
We see no reason why Target with a long-term earnings growth rate of 7.1% cannot breach that mark in the near term. Further, an increasing Zacks Consensus Estimate indicates that analysts are bullish on the stock’s performance going forward. Notably, the Zacks Consensus Estimate for the ongoing quarter and fiscal 2019 has increased 3 cents and 11 cents to $1.61 and $5.92, respectively, in the past 30 days.
Strategic Endeavors to Further Drive the Stock
Retail is no more restricted to brick-&-mortar and the scenario has drastically changed with the advancement of technology and digital transformation, which have altered consumer shopping. In fact, Target has taken steps that have improved prospects in a big way. The company’s initiatives such as the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores to generate higher sales productivity bode well.
Robust traffic, favorable store comps and surge in comparable digital sales are clearly aiding results. Comparable sales rose 4.8% in the first quarter of fiscal 2019. Comparable digital channel sales surged 42% and added 2.1 percentage points to comparable sales. Management envisions both second quarter and fiscal 2019 comparable sales to increase in low-to-mid-single digit range.
Taking Strides in Delivery Business
The company has rolled out Target Restock program that enables customers to restock their shipping box with essential items online and get them delivered at their doorstep by the next business day for a nominal charge. Further, in order to improve supply chain and expand delivery capabilities, the company acquired Grand Junction.
Earlier, Target had teamed up with popular online grocery delivery service, Instacart, to capture the booming online grocery delivery market. Further, the company made significant headway in the same-day delivery race by acquiring Internet-based grocery delivery service, Shipt, to provide same-day delivery of groceries, essentials, home, electronics, toys and other products.
Shipt operates in more than 1,500 outlets in more than 200 markets. Per media reports, online shoppers can now get items delivered on the same day by paying a fee of $9.99 per order. Previously, the company provided same-day delivery service to Shipt members for an annual fee of $99.
Target is deploying resources to enhance omni-channel capabilities, coming up with new brands, remodeling or refurbishing stores, and expanding same-day delivery options to take on Amazon AMZN, Walmart WMT and Kroger KR. Target has undertaken rationalization of supply chain with same-day delivery of in-store purchases along with technology and process improvements.
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