Recently I posted new additions to my Watch List. Since my watch list is a new inception, I only had the two companies listed on it. I have been watching both companies for some time and knew that I wouldn’t mind owning either one of them. While commenting about the other company, Flowers Foods, I made the comment that I thought there might be a better entry point because of increased volatility. Once I saw my thoughts written out I decided then that I should go ahead and start a position in Target.
Target is a great company that has been paying and increasing dividends for the past 48 years. They currently have a PE ratio of 13.6. As of this writing Target is 13.9% off of their 52 week high. Which produces a 3.27% dividend yield on an annual amount of $2.40. Based on EPS the payout ratio is 46.5%. So the price looks attractive and the dividend has plenty of room to grow in the future.
The bathroom policy that everyone talks about in relation to this company makes no difference to me. They went through some volatility in the past when the data breach breached happened and they rebounded in no time. I think this bathroom issue will pretty much be the same. In the long term outlook the company will be fine. They are the second largest variety retailer in America next to Wal-Mart.
I have recently read some articles that talked about Target trying some new kids fashion lines to appeal to a younger generation. I think this is great for them to stay relevant and hip to younger generations. It will allow them to continue building their brand and drawing more and more people into their stores. If the new fashion line proves to be a success I see it helping boost sales during the back to school season.
With all of this in mind, I decided to start a position in Target. I purchased 10 shares with a cost basis of $739.95, so that is about $74.00 per share. This position will add to my exposure in the retail sector as I also hold shares of Wal-Mart. To me it is not a bad plan to hold the 2 best companies in their field. This should add about $12 to my dividend income for the year. Moving forward I plan to continue to hold these shares and add more if there are any pullbacks that drop the price below my cost basis.
I have updated my Portfolio and Dividend Income to reflect my recent buy!
I know that lately Target has been a little darling in the DGI blogging community and that I am getting on board way late. I am totally ok with that though because I would rather get on board now…. than in a few years. The company is a great company that I plan to hold the stock for the long term and reinvest all of my dividends.
I look forward to any comments that you may have. Until then happy investing everyone!