Retailers day two: Target (TGT)

Target (TGT)

Share price: $52.54

Shares: 671.4 million

Market capitalization: $35.28 billion

Bonds: $17.5 billion outstanding with about $1.2 billion due in 2012.


DIVIDEND RECORD – Target missed on quarterly dividend in 2006; otherwise, their dividend record is that of a consistent payer and grower.


Dividend: $0.30 quarterly

Dividend yield: 2.28% ($1.20 annual DIV / $52.54 share price)

Dividend payout ratio: 30% ($1.20 annual DIV / $3.95 avg. adj. EPS) or 27.5% ($1.20/$4.35 latest EPS)

EARNING POWER – $3.95 average adjusted EPS @ 671.4 million shares.  Target has the same earning power per share as Wal-Mart.  What a coincidence!

(earnings adjusted for changes in capitalization – Target has been buying back shares)

                        EPS       Net inc.             Shares               Adj EPS

1/2007              $3.21    $2,787 M           869 M                $4.15

1/2008              $3.33    $2,849 M           851 M                $4.24

1/2009              $2.86    $2,214 M           774 M                $3.30

1/2010              $3.30    $2,488 M           755 M                $3.71

1/2011              $4.00    $2,920 M           729 M                $4.35

Five year average adjusted EPS = $3.95

Consider contrarian buying below $31.60 (8 times avg. adj. EPS)

Consider value buying below $47.40 (12 times avg. adj. EPS)

Target is trading at 13.3 times avg. adj. EPS

Consider speculative selling above $79.00 (20 times avg. adj. EPS)

BALANCE SHEET – Target’s balance sheet is stagnant just like Wal-Mart’s.  A flat shareholder’s equity is really a loss in equity when you factor in price inflation.


Book value per share: $21.44 TTM

Price to book value ratio: 2.45 (Okay, but not good)

Current ratio: 1.38 latest qtr (over 2.0 is good)

Quick ratio: 0.57 latest qtr (over 1.0 is good)

CONCLUSION –  March 2009 was the last good time to buy Target (TGT).  The company has a decent dividend grower record that appears safe.  It earns $3.95 per share on average (same as Wal-Mart) and only trades at 13.3 times this average.  But its balance sheet is stagnant.  You will have another opportunity to buy Target below $31.60 when the worldwide recession returns and all stocks get hammered.  The dividend yield will increase to 5% @ $24.00 share price.  This assumes that TGT holds its dividend steady at $0.30.  They have sufficient earnings to do this.


I will examine tomorrow.

DISCLOSURE – I don’t own Target (TGT) stock.

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Published in: on November 22, 2011 at 1:02 pm  Leave a Comment  

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