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Target Is Putting Pressure On Wal-Mart's Dividend

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June 14, 2012 – Comments (0) | RELATED TICKERS: WMT , TGT

As the world's largest retailer, Wal-Mart (WMT) is not used to being the one bullied. Its new competition is not coming from the retail side, but instead it is coming from the financial side. Specifically, Wal-Mart, who has led the way among major retailers in dividend yield, is starting to get some real competition from Target (TGT).

Target Corp. operates about 1,700 Target and 250 SuperTarget general merchandise stores across the U.S. June 13th the company increased its quarterly dividend 20% to $0.36 per share. The dividend is payable September 10, 2012 to shareholders of record at the close of business August 15, 2012. The yield based on the new payout is 2.5%. WMT's current yield is 2.4%.

TGT has notched double-digit dividend growth every year since 2005. In addition, better-than-expected results led the company to raise its full-year earnings guidance last month by $0.05 cents ($4.60 to $4.80 per share.) Although TGT is trading below my fair value price of $70.56, I am not ready to buy due to a higher level of debt than I am comfortable with, but I am certainty watching it much closer than I have in the past.

Full Disclosure: Long WMT. See a list of all my dividend growth holdings here.

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