TGT Dividend Analysis + What I Read - Target to slash prices on thousands of items, sending shares tumbling
One of my holdings is American Retailer Target (TGT). Why? Because it is one hell of a frikkin CHEAP Dividend Aristocrat.
Today it was down more than 3% most of the day and ended up with losses of more than 2%. I was wondering why? And if this might be a chance to pick some more TGT-crumbs off from under the table.
I just found the reason! At least according to a CNBC article, the catalyst for the down move might have been a blog post by the company, where they announced to SLASH PRICES!
Uwooouh! Wait A Sec!
Not too long ago the same headline (slashing prices) for Amazon owned retailer Whole Foods was frikkin CELEBRATED by the market.
So Again - 2 Retailers Doing The Exact Same Thing
But the market reacts in bipolar opposite ways!
This is manic/depressive MR. MARKET in action.
The article talks about slashing prices means losing on margin and blabla. OF COURSE you're losing on margin in the short term. But having low prices means being ATTRACTIVE for customers. Get more of em, get em into your shop, make em feel cozy and warm and like they are making the killing of a lifetime. And then, when they feel save and good, just sell them some more of all your other stuff that is not price reduced, pushing your top line upwards.
MAN!
This argument applies to both: Amazon AND Target.
Conclusion
I interpret this move by TGT as very positive for the long run. The company has increased dividends for over 50 Years!
Yeah! You heard right! FIFTY - with an F
Like in 5 DECADES. Amazing. They are currently yielding way more than 4%. Even though their outlook on future dividend increases is not THAT good. Last increase was only a meager 3.3% while the 10 year CARG is at a mouthwatering 18%!
From this information my model "predicts" short term dividend increases of only around 5%. Slightly increasing over time as the company stabilizes again after a lot of struggle. I'm currently seeing a Yield On Cost over 5 years of about 7% and over 10 years of about 11.7%.
That means, if the company stabilizes "again" (remember 50!!! years of dividend increases - pretty lonely spot up there), and you invest $1000 now, the company will pay you $117 a year in dividends 10 years from now. Juicy!
And as you know: this is no investment advice, just entertainment & education
Hang Tight!