Target Stock

As many analysts are growing increasing optimistic about target stock, one of the items that seems to really be helping the company is its cash position.  Given the uncertain credit times having a nice (and growing) amount of cash on hand is very important.  In the first quarter of 2010, Target’s cash position increased significantly at a 16% rate.  They did this while also retiring over $1 billion in debt to further strengthen its financial position.  In  addition, the company made a token gesture in repurchasing just under $400 million of its outstanding shares.  All of this is very positive news, but the store must keep consumers coming in and its sales reports glowing in order to reassure investors.  From a balance sheet standpoint, however, things look strong.

Target stock remains committed to returning a strong dividend to its investors.  The recent increase raised its quarterly dividend nearly 50% to $0.25.  This marks 43 consecutive years that the company has increased its dividend.  This puts the total dividend for the company nearly to 2 percent.  This is a strong record and commitment to being an income stock.    With the relatively healthy dividend and low price-to-earnings ratio at the moment Target looks to be an attractive investment at this point.  As a retailer, however, it remains highly sensitive to consumer income and tastes.  It tends to lose sales more quickly than its peers during economic downturns and is often seen as the ‘fancy’ Wal-Mart.

On August 18th Target will release its second quarter 2009 earnings report.  This report will be followed by a conference call with analysts later in the morning.  Target stock had an amazing July, rallying with the stock market ending the month up nearly 13 percent giving it a YTD return of over 26 percent.  This puts the stock at its highest levels since early October 2008 right before it went into a free fall with the rest of the stock market.  The company is still pushing expansion and hopes to open over 20 new stores in the upcoming year.  That’s a significant amount in a an economy mired in unemployment and recession, but management remains confident in its growth plans.

Target shareholders voted overwhelmingly to keep the four incumbent board members Mary N. Dillon, Richard M. Kovacevich, George W. Tamke, and Solomon D. Trujillo.  The entire slate of Pershing Square directors received less than 20 percent of the vote, except for James L. Donald who received 22 percent.  William A. Ackman earned 19 percent.  In so doing, the shareholders at the annual meeting also voted to reject a plan to increase the size of the board of directors for Target Corporation.

After settling with Sears / K-Mart, the California Attorney General’s office has his sites set on Target stock.  K-Mart recently settled a case with California for $8.7 million over the dumping of illegal substances in local landfills.  Apparently, Target Corporation is guilty of similar transgressions.  It is unclear if Target will be offered a settlement, or even want to settle, as K-Mart did.

Year-to-date the Target vs. Wal-Mart stock battle has gone to Target.  In fact, it’s not even close.  Wal-Mart is down over 12 percent.  Target stock, on the other hand, is up nearly 18 percent.  Target also has a leg up on Costco (also down 2009) and DollarTree which is up over 2 percent on the year,

Believe it or now, Target stock ended the week before Memorial Day in the green.  Sure it wasn’t up more than a point and, sure, it dropped nearly 10 percent from its intraday high on Wednesday, but the week was still up.  No one was too excited about its earning beat after the numbers came across.  A thirteen percent profit drop is a tough one to swallow, even these days.