Target (TGT) Rewards Shareholders with Dividend Increase
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What’s the best thing about owning a portfolio of dividend paying stocks?
Collectively, each of these raises pushes our dividend income higher by 5% to 7% every year. That turns out to be an extra $150 of income we get … and we don’t have to lift a finger.
As we continue to invest more and more money each year into dividend stocks and reinvest that extra $150 … our total dividend income compounds year after year.
Dividend increases come in throughout the year for the companies we own … and we like to celebrate each one.
The most recent dividend increase (or raise) from a stock we own was from Target (TGT).
TGT Shareholders Get a 3.3% Raise
Target (TGT) recently announced an annual dividend increase. The company has been consistently raising annual dividends for the past 50 years!
Just think about how awesome that is … a company has been giving its shareholders a raise for the past 50 years. Through the ups and downs of the economy, Target has managed to take care of its shareholders!
That is usually the sign of a top notch dividend stock … when a company has helped their shareholders increase their income for that long of a time.
Company shareholders will now receive $0.62 in quarterly dividends for each share they own … instead of $0.60 paid previously. This increase comes well below our desired dividend growth rate of at least 6%.
The latest increase bumps the annual dividend for TGT up to $2.48 per share compared to $2.40 last year.
Overall, that is a 3.33% increase in dividend income.
How Much Extra Income?
We currently own 54.228 shares of TGT in our Money Sprout Index.
This latest dividend increase has pushed our 12 month forward dividend income for TGT up to $134.49, compared to $130.15 last year.
That is an annual dividend income increase of $4.34.
This is yet another reminder that our dividend income stream is constantly growing every single day … without any extra work from us … no matter how large or small the increase.
With this latest increase by Target, along with recent stock purchases and dividend reinvestment … our annualized forward dividend income has risen to $2,643.93.
Dividend Growth for TGT
We have owned shares of Target for 3.5 years.
Overall, the company has grown their dividend during that time … but at a slower rate compared to other companies that we own.
Take a look at the annual dividend payments since 2012 –
- 2012 – $1.32
- 2013 – $1.58
- 2014 – $1.90
- 2015 – $2.16
- 2016 – $2.32
- 2017 – $2.44 (projected)
Note – The 2017 dividend has been adjusted to reflect the annual increase coming after the 2nd quarter payout.
As you can tell from the numbers above, TGT dividends have been raised consistently over the past several years.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher.
Target has been able to sustain a dividend growth rate that is close to the 6% (or higher) that we look for in a stock.
Here are a few average growth rates for shares of Target –
- 1 Year DGR – 5.17% (2016 to 2017)
- 3 Year DGR – 8.75% (2014 to 2017)
- 5 Year DGR – 13.24% (2012 to 2017)
Target – Buy, Sell, or Hold?
We started buying shares of Target back in January of 2014.
Since that time, we have earned $217.94 in dividends from the company and 2.46 additional DRiP shares.
Note – Shares we are holding in our CapitalOne account have been earning DRiP shares while those in the past in our LOYAL3 account were not. Now that we have transferred our Target shares from LOYAL3 to Fidelity … we will start earning DRiP for all our shares.
Here are a few stats from over the years of buying stock in Target –
- Total Investment – $3,353.35
- Shares Purchased – 54.228
- Dividends Earned – $217.94
- DRiP Shares – 2.460
At the time of this writing, TGT does meet most of our stock screen criteria based on the following metrics –
- Current Yield – 4.80%
- Payout Ratio – 49.37%
- Forward P/E Ratio – 12.18
The company meets the current yield requirement of being greater than (or equal) to 2% coming in at 4.80%. In addition, the payout ratio is around 49%, which is less than the 60% threshold we have set. Finally, the forward P/E ratio is under 20 – which was 12.18.
The one downside is the slowed growth of the most recent dividend increase of less than 6%. However, a current yield of almost 5% makes that less of a concern.
In recent months, Target stock has been hammered by concerns of earnings decline and most recently … Amazon’s acquisition of Whole Foods. Shares of the stock are trading close to 52-week lows.
Based on all of this, we have TGT as a “slight” BUY for our portfolio. If at anytime, the company were to cut their dividend … we would sell our shares immediately.
While there are certainly some valid concerns with the company going forward, I think this is a great buying opportunity in a top dividend growth stock.
The company currently makes up 5.1% of our portfolio, so we will be adding some shares along the way. However, we need to keep in mind our overall diversification of our portfolio and not invest too much.
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – TGT. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.