Target (NYSE:TGT): A Controversial but Still-Reliable Dividend Stock
Stock Analysis & Ideas

Target (NYSE:TGT): A Controversial but Still-Reliable Dividend Stock

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Target, believe it or not, is now considered a divisive company. Still, as the all-American big-box retailer grabs headlines and sparks heated debates, income-focused investors can stay calm and weigh the pros and cons of TGT stock.

Target (NYSE:TGT) is controversial in 2023, but does this mean investors should abandon the company? It’s still a solid dividend payer, and besides, Target delivered pretty good (albeit not spectacular) quarterly financial results. Overall, I am bullish on TGT stock as it can be a reliable buy-and-hold stock, though you’ll have to decide whether the recent headlines surrounding Target are too bothersome for you.

Headquartered in Minneapolis, Target operates a famous big-box retail store chain. I won’t delve too far into the details of the controversy, but let’s just say that Target is involved in a culture war — similar to what Anheuser-Busch Inbev (NYSE:BUD) is struggling with right now — because it was selling LGBTQ merchandise, and some people didn’t like that.

I’ve been around long enough to see issues like this come and go plenty of times. Soon enough, I expect offended shoppers to return to Target because it’s convenient and because Target’s product prices are fairly low. As we’ll discover, there’s actually a more alarming issue that’s causing problems for Target, but the company is addressing this problem while continuing to reward loyal shareholders with quarterly dividend payouts.

Target Acknowledges Theft is a Serious Problem

The alarming issue I’m referring to is theft, which has a serious impact on any retailer’s bottom line and indirectly makes products more expensive for law-abiding customers. This is such a major problem that Target CEO Brian Cornell addressed it in the company’s first-quarter 2023 earnings press release, and Joshua Enomoto wrote an entire article about this important topic.

Whereas Enomoto suggests that there’s “no immediately viable solution appears on the horizon for TGT stock,” Cornell acknowledges the problem of “theft and organized retail crime” (which, I presume, includes shoplifting) but sounds prepared to take decisive action. Thus, Target’s CEO assured that his company is “making significant investments in strategies to prevent this from happening” in its stores.

I would be interested to see a breakdown of those “significant investments,” so hopefully, there will be updates from Target on this matter. In any case, Target’s theft problem hasn’t prevented the company from maintaining its quarterly dividend payouts of $1.08 per share. With that, Target offers a 3% annual dividend yield, which is significantly higher than the sector average of 0.99%.

You Can Choose Data Over Debate with TGT Stock

Some investors may have chosen to sell TGT stock because of the heated debate surrounding Target. That’s certainly a choice that you can make, but you can also choose to stay in the trade because Target’s quarterly results indicate that the company is on the right track, financially speaking.

Even if theft is taking a toll, it clearly hasn’t been devastating to Target’s top and bottom lines. During 2023’s first quarter, Target generated $25.32 billion in revenue, exceeding Wall Street’s forecast by roughly $40 million. Furthermore, Target reported quarterly EPS of $2.05, surpassing the consensus estimate by $0.28.

I must admit, I wasn’t too pleased with Target’s vague forward guidance. Apparently, the company is “planning for a wide range of sales outcomes in the second quarter.” So, Target’s outlook for the company’s second-quarter 2023 adjusted EPS falls into a rather wide range, from $1.30 to $1.70. I think it would be great if Target provides more clarity and specificity on this soon (along with the company’s plan to catch shoplifters).

Is TGT Stock a Buy, According to Analysts?

Turning to Wall Street, TGT stock is a Moderate Buy based on 15 Buys and 10 Hold ratings assigned in the past three months. The average Target stock price target is $181.77, implying 35.8% upside potential.

If you’re wondering which analyst you should follow if you want to buy and sell TGT stock, the most profitable analyst covering the stock (on a one-year timeframe) is Christopher Horvers of JPMorgan Chase (NYSE:JPM), with an average return of 25.89% per rating and a 61% success rate. Click on the image below to learn more.

Conclusion: Should You Consider Target Stock?

If the recent headlines about Target bother you, then you might decide not to invest in the company. That’s perfectly fine, but other financial traders may choose to focus on Target’s financial performance, which has been respectable.

Moreover, Target is evidently dedicated to rewarding its loyal shareholders with steady dividend distributions. So, if TGT stock is falling because of a controversial issue, this could open up a buying opportunity for income-focused investors. Hence, depending on your personal and financial opinions, you can decide whether or not you’d like to consider a position in Target stock.


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