Again, Target Corporation (NYSE:TGT)’s yield is low for my taste, and I’d like to see the company pay out a bit more of its earnings. However, I do like Target very much as a dividend-growth company. If I did not already have a full 10-stock portfolio, I would definitely consider adding Target. In the meantime, I will keep a close eye on it in case I exit one of my existing positions.
Walgreens is on a Roll
Walgreen Company (NYSE:WAG) is currently trading at $48 and also yields 2.6%; the company has been raising dividends consistently for 38 years, and has a 5-year Dividend Growth Rate of 22.9%. Its 5-year projected earnings growth rate is 13%, its P/E is 21.5, and its payout ratio is 48%.
Walgreen Company (NYSE:WAG) last raised its dividend earlier in August, with a 14.5% increase. The 5-year DGR of 23% means the dividend has doubled roughly every 3 years. While the historical DGR is of course no guarantee of future dividend increases, it indicates the company’s commitment to returning value to shareholders via cash distributions. With a 5-year projected earnings growth rate of 13%, well above the average growth rate of the S&P 500, and a reasonable payout ratio, Walgreen Company (NYSE:WAG) seems well-positioned to continue its aggressive dividend policy.
And the company’s stock has been on a tear recently, up 36% year-to-date, despite missing earnings and revenue estimates when it released its numbers in late June. The stock dropped approximately 10% immediately after the earnings release, but quickly rebounded. Investors seem to have focused on the negligible sales increases from a year ago, while ignoring the improved margins that resulted in a 16% increase in net profits.
Walgreen Company (NYSE:WAG) is a reliable dividend company, and I consider it a terrific addition to a dividend-growth portfolio. Although the yield is low for my taste, with the kind of DGR it has been demonstrating the yield might well grow toward the 3% range within another couple of years.
Conclusions
Fund manager David Berman from Durbin Capital told CNBC that the market should be expecting “horrible” earnings reports from retailers this quarter: “In a few weeks, we’re going to have a lot of retailers reporting. We actually think it’s going to be a lot worse than people think. We thought things would bounce back, but they don’t seem to have.”
The next quarter or two look like they might still be a little rough in terms of consumer spending; but remember, these particular retailers sell a lot of necessary items. Consumers still have to buy toothpaste and toilet paper, even if they don’t want to spend money on more expensive, discretionary items.
The article 3 Consumer-Friendly Retail Dividend Stocks originally appeared on Fool.com and is written by Karin Hernandez.
Karin Hernandez has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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