Mega-retailer Target ( TGT ) has a lengthy 50-year streak of dividend increases, which it will likely extend when it announces its next quarterly distribution this week. The stock currently offers a 3.17% yield, and shares have appreciated 16.3% on the year.
TGT was recently trading at $78.66, just $0.70 below its 12-month high and $30.10 above its 12-month low. Technical indicators for TGT are bullish with a strong upward trend. The stock has recent support above $74.50 and recent resistance below $79.25. Of the 17 analysts who cover the stock, four rate it a "strong buy", 12 rate it a "hold", and one rates it a "strong sell". TGT gets a score of 71 from InvestorsObserver's Stock Score Report.
Target has struggled to keep pace with e-commerce leaders, but the company has recently shown improvements in its online business, and investments made in updating its brick and mortar locations have also started to have a positive impact on the company's underlying business. After years of lackluster performance, TGT regained momentum in summer 2017, and the stock is currently just shy of its all-time highs. With so much momentum, it is hard to imagine now would be the time the company would break its five-decade streak of dividend increases. The stock has a 46.8% payout ratio, so it can easily afford another increase. Last year the company boosted its quarterly distribution by just 3.3%, and with a current 3.17% yield, this year's increase is unlikely to be much higher. Look for the dividend to rise from 62 cents to around 65 cents, for a 4.8% increase. TGT will trade ex-dividend mid-August.
Stock Only Trade
If you want a bullish hedged trade on the stock, consider an August 65/70 bull-put credit spread for a 50-cent credit. That's a potential 11.1% return (57.9% annualized*) and the stock would have to fall 10.4% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an August 87.50/90 bear-call credit spread for a $0.25 credit. That's a potential 11.1% return (57.9% annualized*) and the stock would have to rise 11.6% to cause a problem.
Covered Call Trade
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com