Credit: Shutterstock photoWhat's Happening
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.
Technical Analysis
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.
Analyst's Thoughts
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're looking to establish a long stock position in TGT, consider buying the stock under $78.50. Sell if it falls below $70.50 or take profits if it gets to $90.00.Bullish 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.
Bearish Trade
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
If you like the stock but wish to lower your cost basis on a new position, you may want to consider a July $80 covered call. Buy TGT shares (typically 100 shares, scale as appropriate), while selling the July $80 call for a debit of $76.80 per share. The trade has a target assigned return of 4.2%, and a target annualized return of 37.0% (for comparison purposes only).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
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.