Target (TGT) is a company that is attractive in this market.
Mkt Cap: 38.21 Billion
P/E Ratio: 20.4
Dividend Yield: 3.45%
Target has a payout ratio of around 70% which is slightly high for a cyclical company but they have shown commitment to paying their dividend and the ability to generate enough cash to continue to increase it.
payout ratio: the percentage of a companies earnings it pays out in dividends.
I could delve further into their financial statements but there is a more important factor to consider: market sentiment. Target has had very public issues with privacy in the past year. The security breach was embarrassing for the company and the stock suffered.
While this fiasco did cost the company money it was no where near the 5 billion dollar decline in market cap that resulted from the sell off. This is far from an exact calculation but the bottom line is the market over reacted to this negative situation surrounding the company. When a negative story like the security breach comes out, investors sell just because they know others will. This mob mentality magnifies the fluctuations due to negative news.
While the stock is up around 10% from the low in February it is still off its 52 week high of $72.07. The market is still slightly afraid of Target and I see this as a buying opportunity.
The company still has its issues, mainly a botched expansion into Canada. Overall it is a healthy company whose stock has been battered by public opinion. With Target you are getting an established business that is poised to profit from economic recovery. The company also pays a healthy dividend that will reward investors while they wait for the market to realize that the stock is undervalued.
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