Target continues to reward investors
Target (TGT) has a strong history of enhancing shareholders’ returns through higher dividends and share repurchases. Earlier this year, the company hiked its quarterly dividend by 3.3% to $0.62 from $0.60. However, the rate of growth remained well below the growth rate from prior years. The company’s dividend growth rate has gone down in the past couple of years, reflecting pressure on its financials.
However, the company has managed to increase its dividend despite challenges. Target is a dividend aristocrat and has increased its dividend for the past 46 years in a row.
In fiscal 2016, Target paid $5 billion to its shareholders in the form of $1.3 billion in dividends and $3.7 billion in share buybacks. Besides, the company returned $1.1 billion in the form of dividends and $0.8 billion in share repurchases in the first nine months of fiscal 2017. The company’s increased investments in growth initiatives have forced the company to lower the dividend growth rate.
Target offers a higher dividend yield
Target’s current dividend yield of 3.8%, calculated on its closing price of $65.82 as of December 22, remains well above its peers. Walmart (WMT), Kroger (KR), and Costco Wholesale (COST) currently have dividend yields of 2.1 %, 1.8%, and 1.1%, respectively. Moreover, Target’s dividend yield is also higher than that of the SPDR S&P 500 ETF Trust (SPY), which offers a dividend yield of 2.0%.
In simple terms, a dividend yield tells how much cash flow investors receive for every dollar they put in the company’s stock.