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In prosperous economic times, retail sector stocks tend to perform very well, as cyclical stocks typically do in bull markets. Target Corp. (NYSE: TGT) has been a bellwether retail stock and has paid a dividend since it went public in 1967. While the retail sector has been under considerable pressure lately due to brick and mortar stores losing ground to internet sales, Target has adapted and outperformed its rivals in the brick-and-mortar retail industry. Read on to learn how to buy Target stock.
Overview: Target (TGT) and Stock History
Target opened its first retail store in Minnesota in 1962 as part of the Dayton Company, which had originally started as Goodfellow Dry Goods in 1902. The company was renamed the Dayton Corporation in 1967 once it began offering shares to the public. In 1969, the company merged with Detroit-based J.L. Hudson Co. and was renamed Dayton-Hudson Corp.
Dayton-Hudson acquired more retailers like Mervyn’s in 1978 and Marshall Field’s in 1990. In 1999, Dayton-Hudson acquired Fedco to expand operations to Southern California. The company also started its online presence, Target.com, the same year. In 2000, Dayton-Hudson changed its name to Target Corporation, since 80% of the company’s business came from Target stores.
Target continued its acquisitions, and by 2011, the company announced its first international expansion into Canada — it purchased the 220-store leaseholds of Zellers, a Canadian chain store. That ambitious venture soured quickly because of poor supply chains and higher prices on goods. This prompted Target Canada to close all of its 133 outlets in Canada by April 2015. Target Canada cost Target $2.1 billion for its mere 4 years in business.
Future Outlook for Target
Target’s stock has been on a bull run since trading as low as $19.36 in 2009, as the effects of the global financial crisis took its toll on the entire stock market, although the stock recovered to close at $37.34 in 2009, showing a gain of +42% for the year. TGT stock continued gaining in 2010, but the stock declined in 2011.
The years 2012, 2013 and 2014 all saw decent gains on TGT stock, but a -1.6% decline in 2015 initiated single-digit gains on the stock and a loss of -5.8% in 2017. Since 2015, Target stock has traded in a range of $48 to $90 and currently trades at $82.50 per share.
Target has nevertheless outperformed its peers in the industry by keeping up with the times and gearing its promotional efforts to specific audiences, including online customers. TGT’s performance so far in 2019 has already included a rise in the stock by +23% and some analysts expect the stock to trade as high as $110 per share by year’s end.
The company currently has a growth rate of +10% annually. The outlook for the company is positive in all time frames as long as the U.S. economy continues showing strength, although a significant downturn in the U.S. economy, as some analysts presently forecast, would probably adversely affect Target’s stock price in the future.
Analysts with major banks and brokers either recommend the stock as a buy or as a hold with very few analysts currently negative on the stock’s future performance. The company earned $1.53 in the first quarter of 2019, which met analyst expectations. For the company’s second-quarter results, which will be released on August 23, 2019, analysts predict somewhat higher earnings, of $1.54 to $1.72.
Pros of Buying Target Stock
- Steady increase in earnings: The last five years have seen a steady increase in Target earnings that should continue into 2020, according to many analysts.
- $7 billion spending initiative: Target implemented a $7 billion initiative in 2017 that involved a notable spending increase. The company determined that the best way to invest the funds would be to remodel 600 stores and expand its online presence. The initiative has already begun to see results as the company experienced a rise in shoppers and improved earnings.
- Growing online sales: Part of that $7 billion has been allocated to improving online sales. While Target may not be able to compete with Amazon or Walmart due to its size and market share, Target has a vast client base loyal to the store brand.
- Rising dividend: Target pays an annual dividend of $2.52, which presently yields 3.08% per year and has consistently risen for almost half a century. The company’s dividend could be important if you’re looking for a reliable income on your stock holdings.
Cons of Buying Target Stock
- Forecast economic and stock market downturns: A downturn in the economy and a decline in stock prices could directly affect the price of TGT stock. Cyclical stocks and retail stocks are especially prone to selling off considerably during market declines and times of economic weakness.
- Looming tariffs on Chinese goods: Most brick and mortar stores depend on having a large percentage of inexpensive Chinese merchandise in inventory. According to a recent report by UBS, a 25% tariff on Chinese goods could jeopardize $40 billion in sales and lead to the closure of as many as 12,000 stores in the retail sector.
- Decline in consumer satisfaction: Target hit an all-time high on the index of 81 in 2012, according to the American Customer Satisfaction Index (ACSI). It has since steadily dropped to its present level of 77, which compares to Costco’s reading of 83. While the reading in and of itself has little meaning, the declining trend suggests that consumers have lost a certain degree of interest in shopping at Target.
- Data breach: Target is still feeling the effects of a data breach which exposed 41 million of the company’s customer accounts in 2013. Target paid out $18.5 million in fines related to the data breach in 2018, which drew court challenges in 41 United States. That event may continue to weigh on the stock’s valuation.
How to Buy Target Stock Using a Broker
In order to purchase TGT stock, you need to deposit an appropriate amount of money in an account with a reputable stock broker that can execute trades on the New York Stock Exchange (NYSE).
If you just want to buy Target stock as an investment to hold in an account for the long term, perhaps to collect dividends and for capital appreciation, you could use a discount broker and save yourself some commissions. Keep in mind though that if you use a discount broker, you may not get access to any special features or research customarily offered by full-service brokers.
Your first order of business is to determine what you need from a broker to meet your requirements. Remember that how you buy Target stock is just as important as where you trade, so make sure you pick the right broker.
- Pick a Broker
Once you have decided on what you need from a broker, you can now better assess which broker would best suit your needs. For example, if you have limited stock market experience and would like educational material in addition to an easy-to-navigate trading platform, you might choose TD Ameritrade or E*TRADE.
If you have a strong trading background, a substantial initial deposit and wish to trade through an advanced trading platform, you might pick Interactive Brokers. This broker caters mainly to well-financed and experienced traders who wish to access different financial markets and operate in a wide variety of tradable assets.
- Assess Different Brokers’ Trading Platforms
Most online brokers offer their customers a demo or practice account. These accounts are ideal to evaluate a broker’s trading platform and services, in addition to letting you practice your trading and develop a winning strategy. You can open as many of these demo accounts as you wish and they can help you decide which would be the best online brokerage for your needs.
Trading platforms vary considerably from broker to broker, so make sure you feel comfortable with a broker’s trading platform before you decide to open an account. Basically, once you have gotten used to and feel satisfied with a broker’s trading platform, you can whether to open a live account with that broker.
- Fund Your Trading Account
Before you can buy stock, you need to fund a trading account. Depending on the amount of Target stock you’ve budgeted for, you will need to deposit either that amount or the minimum deposit amount that the broker requires, whichever is greater.
While some brokers do not require a deposit to open an account, you will still need to make a deposit to buy Target stock. Most brokers let you deposit via credit card or bank transfer, so make sure you have the resources to fund the account.
Each broker has its own requirements for initial deposits and how to make one to fund a trading account, so be sure to check with the broker you are considering.
- Buy Target Stock
Now you’re ready to buy Target stock. Hopefully, you’ll have enough experience trading in the demo account to know how to enter a buy order for the stock.
You might also want to take a couple of trading days to watch how TGT trades throughout the session. This will give you some insight into the stock’s trading patterns and help you determine the best entry point to buy the stock.
Also, check the latest Target news items and analyze the levels of supply and demand of the stock using technical analysis. After watching the stock and conducting your own market research and analysis, you should be ready to enter a bid for the stock either at the market or at some realistic level below the current market to get a better execution price.
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Is TGT Stock for You?
If you are looking for a decent dividend-paying stock, Target remains a member of the S&P 500 Dividend Aristocrats, which consist of the 57 stocks in the broad market index that have raised their dividends for 25 or more years, since Target has raised its dividend for 47 consecutive years. Target stock might be one to consider because of its $2.52 yearly dividend also works out to a yield of 3.18%.
Keep in mind that investing in cyclical stocks like Target requires a positive outlook on the overall relevant economy. Think the current U.S. economy has a good chance of improving (despite the business cycle showing signs of topping out)? Then you might want to invest in Target stock.
On the other hand, if you expect a weak economy, you’d probably be better off buying a more defensive stock to weather an upcoming downturn, though Target’s innovative approach in dealing with different adverse factors would probably limit the stock’s price on the downside. Target’s stock and the company, in general, have done better than its counterparts in the retail industry for that very reason.