Target (TGT) is a Top Dividend Stock Right Now: Should You Buy?
Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.
Target in Focus
Headquartered in Minneapolis, Target (TGT) is a Retail-Wholesale stock that has seen a price change of 56.59% so far this year. Currently paying a dividend of $0.66 per share, the company has a dividend yield of 2.55%. In comparison, the Retail - Discount Stores industry's yield is 0.95%, while the S&P 500's yield is 1.97%.
Looking at dividend growth, the company's current annualized dividend of $2.64 is up 4.8% from last year. Target has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 6.39%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Target's payout ratio is 46%, which means it paid out 46% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, TGT expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $6.13 per share, which represents a year-over-year growth rate of 13.73%.
Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that TGT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).
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