Is Target A Buy After Announcing A 20% Dividend Hike?

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Retail giant Target (NYSE:TGT) is struggling with high levels of inventory, but that isn’t stopping the company from raising its dividend or remaining bullish on its financials. Last week, the company announced that it would be raising its quarterly dividend payments by 20%, up to $1.08. What’s impressive is that a year ago, Target hiked its dividend by an even more impressive rate – 32%. In a span of a little over a year, the company has gone from paying $0.68 per share every quarter to $1.08.

This also marks the 51st straight year that Target has increased its dividend payments. It’s a Dividend King and is one of the most stable income investments you can own on the stock market. With the recent bump in the payout, Target’s stock is now yielding around 2.9%. The company could have kept its dividend streak going by increasing its payouts by any amount. By raising them at such a high percentage, it shows confidence in the business plus it demonstrates its commitment to creating value for shareholders.

Since the start of the year, Target’s stock has fallen by 35%. Rival Walmart has declined by a more modest 16%. However, both stocks trade at fairly comparable forward price-to-earnings multiples, with Walmart at 19 and Target at 17. With Target’s lower valuation and the stock falling of late on a troubling earnings forecast, this is a stock that investors will want to watch closely. Although it’s facing some headwinds relating to inventory, they aren’t going to weigh down the business in the long term. There’s still lots of value in this retail stock and if it falls any further, Target could be too attractive of an investment to pass up on.