05-21-2014, 04:59 PM
On the one hand, I’m excited about the drubbing that TGT’s stock price has been taking lately. On paper it remains a very strong dividend growth stock, and this is an opportunity for me to add to my partial position at much better prices. TGT hasn’t seen the 3 percent yield mark in a long time, and has a dividend growth streak to envy. Earnings are not in great shape at the moment, and as a result, the payout ratio is increasing. It is still south of 60 percent, though. I would be very surprised if TGT did not provide a dividend raise in Q3 to keep the streak alive, but I suspect it will be a pretty small raise, especially compared to the very large ones in recent years. Even if they only raise by a penny, though, (from 43 cents to 44 cents per share per quarter), that would represent a better than 10 percent raise year over year (as a residual result of the very large raise in 2013). If this were a consumer staples company, I’d be loading up with little reservation, on the faith that the recent stumbles are temporary and that the ship will be righted. Earnings will get moving in the right direction again, and we will remember this stretch as a great entry point.
But on the other hand, I’m having a bit of a crisis of faith about retail stocks right now. I don’t think TGT is going bankrupt any time soon, but I think the headwinds against bricks and mortar retail are getting stronger, and will only increase as the years roll by. TGT has lost traffic for six quarters in a row, and online sales generally (not TGT) are increasing steadily. Sure, WMT and TGT could improve their online presence, but I don’t think there is a chance in hell that either of them could catch Amazon, or even slow it down. This should not scare me out my holdings in the short or medium term, but I am trying to construct a portfolio that will weather the seas for decades to come. I’m just not sure that bricks and mortar retail stocks are a great long-term holding.
The names I hold at the moment that are suspect on the basis of this thinking are TGT, WAG, O, and ARCP. Together, those four names make up about 9 percent of my portfolio. I’m not planning to sell anything, but I think I’ll be very hesitant to add to this segment until I can get more comfortable about long-term prospects. The exception would be where a solid company is looking clearly undervalued. TGT’s share price is in much nicer (that is, lower) territory than in the recent past, but with a P/E in the high teens, it is not a screaming bargain.
What do you all think?
But on the other hand, I’m having a bit of a crisis of faith about retail stocks right now. I don’t think TGT is going bankrupt any time soon, but I think the headwinds against bricks and mortar retail are getting stronger, and will only increase as the years roll by. TGT has lost traffic for six quarters in a row, and online sales generally (not TGT) are increasing steadily. Sure, WMT and TGT could improve their online presence, but I don’t think there is a chance in hell that either of them could catch Amazon, or even slow it down. This should not scare me out my holdings in the short or medium term, but I am trying to construct a portfolio that will weather the seas for decades to come. I’m just not sure that bricks and mortar retail stocks are a great long-term holding.
The names I hold at the moment that are suspect on the basis of this thinking are TGT, WAG, O, and ARCP. Together, those four names make up about 9 percent of my portfolio. I’m not planning to sell anything, but I think I’ll be very hesitant to add to this segment until I can get more comfortable about long-term prospects. The exception would be where a solid company is looking clearly undervalued. TGT’s share price is in much nicer (that is, lower) territory than in the recent past, but with a P/E in the high teens, it is not a screaming bargain.
What do you all think?