Target Slashes Inventory, NOT Dividends — Why That’s a Huge Deal

In the midst of selling a market like this, I welcome any good news I can find.

and Target Corp.’s (NYSE: TGT) Its dividend plan for the future is a massive boost in confidence in its investors.

Here’s why…

This has been a terrible year for a big box retailer like Target.

The supply chain is still in a mess, and inflation is raising inventory prices while also making it harder for consumers to afford the goods that are already on the shelves.

Changing the taste of consumers in the post-COVID world adds another layer of complexity. Buying a fancy blender or a large screen TV would have made a lot more sense when you were spending all your time at home. Now travel gear and new work clothes are at the top of everyone’s shopping lists.

All of this led Target to drop a bomb on investors last week when it announced it would cut inventory. The retailer also marks the prices in its stores to clear the abundance.

Investors have thrown TGT shares into the news, accelerating its losses in a miserable year already for the retailer.

Target stocks are now down nearly 50% after peaking in November.

In the midst of all the gloom, Target simply gave her Investors Significant strengthening of trust. The company announced It will cost His dividend by 20%.

This is not an unusual move. Target has raised its dividend for 51 consecutive years.

I’m more impressed by the size of the dividend increase: a 20% increase is large, and it follows Target’s 32% increase in dividends last year.

Why raising Target’s dividend is huge

There is an old saying of a trader that the safest dividend is the one that has just been raised. To explain why, let’s start with the basics.

When a company pays a dividend, it parted with hard cash. For managers, it is not always easy to come to terms with it. Their natural urge will always be to hoard that capital … just in case the economy cools down, or the company has failures.

God Latest One thing a board wants to do is reverse the track and cut its dividend later. It’s embarrassing and sends a terrible message to investors.

This leaves one reason for the board to increase the dividend: they expect to see a lot more cash coming in to replace what they pay.

Even in a one-year fire, Target is confident enough about its future to announce a significant increase in dividends.

It means something.

TGT Stock Power Rating

The target dividend yield is about 2.9% At current prices. This is not a lethal return, but you can expect it to continue to raise this payment at a much faster rate than inflation.

However, I will stop recommending Target. Our proprietary stock rating system shows us why.

Target Corp. On June 14, 2022.

It ranks a “Neutral” 43 Within our system. Neutral stocks should appear consistent with the overall market over the next 12 to 24 months.

Its momentum rating of only 30 is a big reason why I can not back this stock up right now. You can see it in the chart of the stock above. TGT is a “falling knife” proverb right now, and trying to time the bottom is a futile exercise.

The Bottom Line: However, you will want to keep an eye on it.

Target rates are excellent:

  • 84 On our quality factor.
  • 66 On value.
  • and 62 On our growth factors.

It is a high quality growth stock trading at a value price.

But be patient. When you see evidence of momentum improvement for TGT (which should increase its overall score), consider making it a long-term holding.

To ensure profits,

Charles Saysmore_Sig

Charles Sizemore, co-editor, Green Zone Fortunes

Charles Sizemore Is the co – editor of Green Zone Fortunes And specializes in income and retirement issues. He is also a frequent guest on CNBC, Bloomberg and Fox Business.

Target Slashes Inventory, NOT Dividends — Why That’s a Huge Deal Source link Target Slashes Inventory, NOT Dividends — Why That’s a Huge Deal

Related Articles

Back to top button