Target Corporation Continues Rewarding Shareholders with Rising Annual Dividends (TGT)
By: Ned Piplovic,
The Target Corporation (NYSE: TGT), an S&P 500 company with a 25-plus year record of consecutive annual dividend hikes and a market capitalization that exceeds $37 billion, meets all the requirements to be included in a selective group of only 51 companies designated Dividend Aristocrats.
While the minimum requirement to be a Dividend Aristocrat is a 25-year history of consistent annual dividend hikes, Target has been raising its annual dividend for more than four decades and has been a Dividend Aristocrat for more than two decades. Barring any unforeseen circumstances or “Black Swan” events, it does not appear that this company will be dropping out any time soon.
In addition to a long record of providing its shareholders with rising dividends, the company also has a record of considerable asset appreciation over the long term, albeit with periodic downturns that affect the entire retail sector occasionally. Currently, Target has given its investors a one-year total return of more than 25%, after a small loss on shareholder investment over the past three years.
The Target Corp. currently yields 3.6% and will distribute its next dividend on June 10, 2018. However, interested investors should take a position prior to the ex-dividend date of May 15, 2018.
Target Corporation (NYSE:TGT)
Headquartered in Minneapolis, Minnesota and founded in 1902, the Target Corporation operates as a general merchandise retailer. It offers household essentials, apparel, home furnishings, small appliances, home improvement and automotive products, music, movies, books, computer software, sporting goods and toys. In addition, it offers in-store amenities, including Target Café, Target Photo, Target Optical, Starbucks, and other food service offerings. Target Corporation sells products through its stores; and digital channels. As of March 8, 2018, the company operated 1,826 stores.
Over the last year, Target’s share price growth has been stellar. Despite a double-digit-percentage drop to the 52-week low price of $48.56 on June 16, 2017, the share price embarked on a six-month uptrend and gained 62% before topping out at its 52-week high of $78.70 in January 2018.
Since then, TGT shares declined through a couple of overall market sell-offs in February and early March 2018, and currently trade at $69.42 as of the close on May 8 in a more stable pattern. Because of the share price volatility over the past several years, the $69.42 closing price is about 2% lower than it was five years earlier, but it is more than 20% higher than just one year ago and 42% above the 52-week low from July 2017. By no means a bad return over the last year or so.
Of course, Target’s dividend payment record is continuing unabated. Currently, the company pays a $0.62 quarterly payout that is 3.3% higher than the $0.60 distribution in same quarter last year. Target’s current quarterly amount is equivalent to a 3.6% dividend yield and converts to a $2.48 annualized dividend payout for 2018.
However, the total annual dividend payout is most likely to be higher than the current annualized amount. Based on the company’s dividend history over the past 15 years, Target should boost its quarterly dividend with the next payment declaration, which should come in early June with a mid-August ex-dividend date and the pay date in early September.
Also, last quarterly dividend hike of 3.3% was uncharacteristically low. Over the past two decades, the company enhanced its total annual dividend amount more than 18-fold and maintained a 15.7% average annual growth rate since 1998. While the annual dividend did grow at a higher rate 20 years ago, the average dividend growth rate over the past three years is still 7.5%.
Finally, Target also presents an interesting conundrum in terms of total return. As the TGT share price declined more than 55% in the first six months of 2017, the total returns on shareholder’s investment over the longer terms are lower than the recent total returns. Because the current share price is marginally below the level from five years ago, the entire 13% total return over the past five years is comprised mostly of dividend payouts. Over the past three years, the company returned a small negative loss. However, the more than 20% share price growth over the past 12 months combined with the dividend income for a 25% total return over the past year.
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