Tag Archives: TGT

April’s Pick

This month makes for some interesting choices for us when it comes to choosing a stock. After assigning the scores to the stocks we follow (all those listed on the S&P 100 plus a few other Canadian dividend champs), there was a three-way tie for first place but we aren’t comfortable recommending any of the three – all for different reasons. The three top choices were: Home Capital Group (TSE: HCG), Alaris Royalty Corp. (TSE: AD) and Target Corp. (NYSE: TGT).

Here’s what we like and dislike about each one. Home Capital is trading 35% below their 52-week high so that’s a very attractive discount. They are in the consumer finance sector, providing mortgage lending, credit cards, line of credit lending, etc. It currently yields 4.2% with a long history of increasing dividend payments. As dividend investors, those are things we REALLY like. They have a P/E of 7 and EPS of 3.71 – both good-looking numbers. So what’s the problem? Their 10 year price history shows very slow growth with decreasing prices since August, 2014. That might not be good for a company with a market cap of only 1.6B. Also somewhat concerning is there has been some considerable insider selling of pretty sizeable blocks of stock.

Alaris Royalty Corp is trading at a discount of 28% below their 52-week high which is a solid discount and they pay a stable dividend of over 7%. Wow! The company has been increasing that dividend for at least the last 10 years despite a lack-lustre price performance history over the same period. From a purely dividend investing perspective this is a very attractive stock to own as in the worst case you’ll enjoy a return of over 7% a year. Again, this company is small with a market cap of under a billion dollars (about 800 million) so there is a little more risk. Also, remember that past performance is not a guarantee of future yield so that dividend is not a guarantee but it seems like a pretty good bet. We should also point out that the current price is 25% above the 52-week low which might suggest a recovery is underway.

We recommended Target for each of the last two months and we still think this stock is worth a look. See our last two posts if you’d like to know why we like it. So why not recommend it for a third month in a row? Simple. The stock price has declined in each of the last two months. Generally, we like to purchase a stock when it is showing signs of recovery. While we did suggest Target last month on a lower price from the month before, we felt it was a good enough opportunity to overlook the decrease in price. Three months in a row is more than we’re comfortable recommending to people. Would we suggest this stock to a friend asking for advice? You bet we would! It’s worth reminding readers that a price decrease means a dividend yield increase so the yield of 4.3% on last month’s price has increased to 4.5% on this month’s price.

Well, there you have three stocks worth considering. Now it’s time for our official recommendation which is Canadian Imperial Bank of Commerce (TSE: CM). Canadian banks are very stable and CIBC is sporting a P/E of 9.77 with EPS of 11.77. That’s right – their earnings per share are greater than the price to earnings ratio. That’s not something you see everyday and indicates a stock that is very well-priced. The stock is trading at only 4.8% off it’s 52-week high but as Warren Buffet always says: “It’s better to buy a great company at a fair price than a fair company at a great price.” We happen to think this is a great company at a better than fair price so it’s our pick for the month. When in doubt, stick with what you know!

March’s Pick

If you liked our pick last month, you’re going to really like this month’s. We’re going with Target (NYSE: TGT) again. “But, Target is trading nearly 12% below the price you paid last month!” you exclaim. That’s exactly WHY we’re recommending it again this month. If it was a good deal last month, it’s a better deal this month. About a week ago Target got clobbered because they missed their EPS forecast (and not by a little) and their sales were down from the same period the year before. Most big investors don’t like that news which resulted in a huge sell-off. Well, we’re not big investors. We’re amateur investors just looking for good companies at great prices to hold for a really long time. Target fits that description. Does missing their EPS forecast change the company in any way? No. Have other great companies ever missed their EPS forecasts? Of course! So, don’t sweat it. A few years from now nobody will even remember this price dip, and we will have enjoyed the long, slow climb back up.

Target’s P/E is still an attractive 12.21 and EPS are 4.28. Not to mention the dividend has increased to nearly 4.3% because of the price drop. If buying Target makes you nervous, wait another month to see what happens. Remember, we’re in this for the long term so a month or two is nothing.

Some ‘experts’ are suggesting Wal-Mart Stores (NYSE: WMT) as a better investment than Target. If it helps you sleep at night, buy them instead. They have a P/E of 16.35 and similar EPS of 4.39 but they are only 5% off their year long high and their dividend yield is only 2.8% (that’s why they aren’t on our radar – our minimum is 3.5%). But are they really a better investment? In January, 2015 they were trading at $90 compared to the current price of $70. That’s a 22% decline. The wouldn’t have been better had you bought then. The price bottomed out around $57 before the stock began to recover. Overall, that’s a 37% decline. Still doesn’t seem better had you endured that gut-wrenching plummet. That would have been a scary time to own a company that some say is a better investment today. But the price did recover, didn’t it? Was there ever any doubt? Of course not! Wal-Mart is a great company. We just don’t think it’s at a good price right now. The point is, every stock has ups and downs. By watching the 52-week highs and lows, we try to buy when the price is good and seems to be recovering. Admittedly, Target hasn’t started to recover yet but we think it will soon enough.

February’s Pick

It might seem as though choosing a stock is a tricky thing to do. It is. Every month we update the relevant financials for each stock we follow (all 194 of them), assign the scores and narrow the list down to two or three candidates. Anyone who’s been following this blog will recognize that we often have trouble settling on just one. We’ve committed to always choosing a single stock, so, sometimes with much hesitation, we force ourselves to make a single recommendation. Regular readers will also note that we often add “But, hey – any of these suggestions would be a great choice.” This month is no different…

Target (NYSE: TGT) came out on top once the scores had been assigned and that’s official choice. The stock has been beaten down from $78 to $63 the last three months and is currently 24% off their 52-week high. The decline seems to have stopped as the price has stabilized over the last month or so and that’s why we’re suggesting it now. The company hasn’t changed – they still still reasonably priced products that we all want. That’s a good thing. What’s changed is that we can now buy shares in the company at a price that seems to be a pretty deep discount. Target has EPS of 5.45 and a P/E of 11.7. That P/E puts them in the top 10 of all stocks we follow which means lots of people out there will soon discover this stock is underpriced and will want to buy it. That’s also good for us. The current dividend rate is 3.76% which is not stellar but for a $36 B company is pretty much a guarantee and sure to increase year over year. We are, after all, dividend investors so we can enjoy that dividend payment while we ride the share price up. The other thing we like about this purchase is that it’s in the retail sector so it increases the diversity of our portfolio.

In case you’re wondering, CIBC (TSE: CM, NYSE CM), General Motors (NYSE: GM) and Ford (NYSE: F) rounded out the top four picks this month in a very close race.