This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
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As a shareowner of Wal-Mart, I am not looking to add another general merchandise and food discount store to my portfolio. However, as a stock that has a place on the Dividend Aristocrat list I wanted to have a look at it. 25 years of dividend increases is nothing to sneeze at and the people I speak with who visit the store regularly speak highly of it – kind of an upscale Wal-Mart. As a Canadian, we do not have Target stores so I can’t compare or validate this – perhaps my U.S. readers can elaborate on this?
The Company: Target Corp. (TGT-NYSE)
The Company operates large-format general merchandise and food discount stores in the United States, which include Target and SuperTarget stores. It offers both everyday essentials and fashionable, differentiated merchandise at exceptional prices.
| Yes | |
| Yes |
THE FUNDAMENTALS
Revenue
Click to EnlargeRevenue Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My Revenue Score | 0.5 |
Earnings Per Share
Click to EnlargeEarnings Per Share Scoring
| Criteria | Scoring |
| Consistenly Up with No Down Years | 1.0 |
| Up Trend with Less Than 2 Down Years | 0.5 |
| Choppy with Greater Than 2 Down Years | 0.0 |
| My EPS Score | 1.0 |
TOTAL FUNDAMENTALS SCORE: 1.5
THE RATIOS
Return on Equity
Click to EnlargeReturn on Equity Scoring
| Criteria | Scoring |
| Above 15% for Last 5 Years | 1.0 |
| At Least One Year Below 15% in Last 5 Years | 0.0 |
| My ROE Score | 1.0 |
Other Ratios
| Ratio | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Debt to Equity | Less Than 0.50 | 1.12 | 0.0 |
| Payout Ratio | Less Than 60% | 16% | 1.0 |
| Credit Rating | BBB+ | A+ | 1.0 |
| Total Ratio Score | 2.0 |
TOTAL RATIOS SCORE: 3.0
DIVIDEND DATA
Annual Dividends
Click to EnlargeDividend Scoring
| Criteria | Scoring |
| 25+ Years of Dividend Growth | 1.0 |
| 10+ Years of Dividend Growth | 1.0 |
| Less Than 10 Years of Dividend Growth | 0.0 |
| My Dividend Growth Score | 2.0 |
TOTAL DIVIDEND GROWTH SCORE: 2.0
STOCK VALUATION
| Valuation Metric | Criteria | Value | Score (Pass=1 / Fail = 0) |
| Dividend Yield | Cur Yld Greater Than 10 Yr Avg Yld | 0.8% | 1.0 |
| Div Yld Compared to SPY Div Yld | Cur Yld Greater Than SPY Yld | 2.4% | 0.0 |
| P/E Ratio | Cur P/E Less Than 10 Yr Avg P/E | 20.6 | 1.0 |
| Relative P/E | Relative P/E Less Than 1.0 | 0.67 | 1.0 |
| Price to Sales | Less Than 1.5 | 0.64 | 1.0 |
| Total Ratio Score | 4.0 |
Canadian Shareowner’s Association Stock Selection Guide Software Buy Price
| Buy Zone |
Maybe Zone |
Sell Zone |
Current Price | Rating | Scoring (Buy=1.0, Other=0.0) |
| 1.0 |
TOTAL STOCK VALUATION SCORE: 5.0
SUMMARY
Points Earned:
11 out of 14 – half points are rounded down to be conservative
The stock is rated HIGH with 11.5 points earned through my analysis of the stock. Target has been a strong performer and is poised to continue. The revenue numbers have been real strong. The most recent EPS growth rate has dropped in comparison to the 10 year average growth rate (4.4% versus 14.4%), so that would be something to watch. However, as a Wal-Mart shareowner, I am not looking to add to this market sector. It was interesting to run through this as I have a real strong competitor to pit Wal-Mart up against when I look at adding to this sector down the road.
| Rating | Points Required |
| High | 11+ points |
| Medium | 8-10 points |
| Low | < 8 points |
Reminder: This is an analysis completed by The Dividend Guy. It is not to be used as investment advice or a recommendation to buy, hold, or sell any stocks discussed. Please ensure you complete your own analysis.
The Dividend Guy does not own shares in TGT