How to Buy Target Stock (TGT) | The Motley Fool (2024)

Target (TGT 1.77%) has become a go-to shopping destination for millions around the country who search the store for everything from home goods to clothes to food to gadgets.

The story of Target began in 1902 in Minneapolis, when the Goodfellow Dry Goods store was located on the site of an 1893 fire that had burned the Westminster Presbyterian Church to the ground. The church couldn't cover the cost of a new building, but George Dayton, a parishioner, bought an adjacent lot, constructed a new building, and acquired the Goodfellow store as a tenant.

When the owner of the Goodfellow store retired, he conveyed his interest to Dayton, who formed the Dayton Dry Goods Company, and eventually, The Dayton Company. By the 1920s, the company brought in millions in revenue and had expanded through new locations and acquisitions. When Dayton died in 1938, his son Nelson took control of The Dayton Company, by then a $14 million enterprise.

In the 1950s, the company bought a department store company based in Oregon and opened a shopping center in the Twin Cities suburb of Southdale in 1956 -- the first indoor regional shopping mall in the country, which is open to this day. The first Target discount store was opened in 1962 after a Dayton Company employee came up with the idea for upscale discount store experiences. By the end of its first year in business, there were four Target stores open.

The company rebranded as The Dayton Corporation and became a publicly traded entity in 1967. The years that followed included updates to its logo to feature the modern bullseye look, as well as acquisitions of various brands, including bookstores and an electronics and appliances chain. The Dayton Corp. merged with the upscale retail department store chain J.L. Hudson Company in 1969, and became the Dayton-Hudson Corp., placing it among the top 20 retailers in the U.S.

As the parent company sold off various owned shopping centers in the years that followed, it continued to expand its portfolio of Target locations both through new openings and aggressive acquisitive maneuvers. By the late 1990s, Target operated 851 stores in the United States and was turning $23 billion in annual sales, even as Dayton-Hudson's Corp.'s other brands struggled.

In 1999, Target capitalized on the dot-com boom and launched an e-commerce site; the next year, it rebranded from the Dayton-Hudson Corp. to Target Corp. Target now has roughly 2,000 stores across the nation with annual revenue of more than $107 billion. If you want to buy shares of Target stock, here's what you need to know.

How to invest

How to buy Target stock

Because Target is a publicly traded enterprise, you can buy shares of the company through your brokerage account in just minutes. If you don't have a brokerage account, creating one is easy and can be completed with just a few simple steps. Before you buy shares of Target stock, there are some other things to consider, including how the stock fits into your overall investment portfolio.

Step 1: Open a brokerage account

If you don't have a brokerage you use, you'll want to pick one to open an account with. Look for brokerages that offer perks like low or no maintenance fees, no account minimums, and plenty of investment options. For example, you might want to select a brokerage that lets you buy fractional shares of stocks, which many but not all platforms allow.

To open a brokerage account with the financial institution of your choice, you'll need to have some information readily available. This will include details such as your name, address, email, date of birth, and Social Security number.

Step 2: Figure out your budget

Before you can buy shares of Target stock, you need to determine your investment budget. You shouldn't be investing money that you'll need for financial obligations like bills or outstanding debt. Instead, you should only put capital to work that you can leave in stocks that you add to your portfolio for at least five years or more.

As you determine your investment budget to invest in Target stock or any other stock, consider that it is wise to diversify your capital across 25 or more companies and invest consistently through various market cycles. You can add to your winners and trim your losers over time, but it's important to avoid ineffective strategies like market timing.

One way to invest in stocks consistently is through dollar-cost averaging, regularly investing a set amount of cash in stocks at habitual intervals. That way, you can benefit from both the up and down cycles of the market while building your portfolio in a wide variety of investing landscapes.

Step 3: Do your research

Whether buying shares of Target stock or any other company, you need to do your homework before you hit the buy button. Doing your own research about the company ensures that you understand the business you're becoming part-owner of and that it aligns with the overall financial objectives you've outlined for your portfolio.

Your preferred portfolio balance may change with the passage of time, but ensuring that any company you add to your basket of stocks is thoroughly researched and fits with your risk tolerance level can help you separate the wheat from the chaff.

Step 4: Place an order

If you're ready to place your order for Target stock, you'll want to log onto the platform for your chosen brokerage and search the ticker TGT. Determine how many shares you want to buy, or select the dollar value you want to spend.

If you place a market order for Target stock, that order will go through right away at the current share price the company is trading at. If you place a limit order, this means that your investment in Target stock will only execute if shares hit the price you specify. This makes a market order the more advisable choice in the majority of cases.

Should I invest?

Should I invest in Target?

Target is one of the top retailers of the country. As of 2023, the company was the sixth-largest retailer in the country by revenue. It's been a turbulent few years for the company following its successes during the height of the COVID-19 pandemic and a difficult readjustment period since then. With so many people shopping online and an expansion of services like same-day delivery and pickup during the pandemic, Target rose to meet the occasion.

Profits and revenue soared in 2020 and 2021, bolstered by incredible growth in its e-commerce segment and the resilience of its business. Sales grew more in 2020 than they had in the entire previous decade. But as the economy worsened, discretionary spending took a hit, and the pace of online sales moderated following its feverish surge during the worst of the pandemic. Target found itself dealing with a serious slowdown in growth and excess inventory on its hands.

Supply chain difficulties and the pace of inflation also made the cost of operations significantly higher. In the last few years, markdowns to sell off excess merchandise, increased competition within the retail space, and the merchandise mix it carries compared to its rivals have been cited behind its slowing growth.

Some of these elements are specific to Target's operating landscape Target, but many can be attributed to changes that the business must make to continue growing. While the pace of discretionary spending is softer than it was a few years ago, Target has been trailing the performance of other big-box stores like Costco (COST -0.24%) or Amazon (AMZN -1.78%):

Whether you should invest in Target stock will depend on multiple factors, including your investing goals and if the business is a good fit for your portfolio. For example, growth-oriented investors might prefer to look elsewhere; value-driven shareholders might find there is plenty to like about the big-box retailer.

As of early 2024, Target delivered revenue just shy of $25 billion, down single digits from the prior year but in line with the revenue that the company reported in the same period in 2021.

The company's operating margin improved 140 basis points in early 2024 from the year-ago quarter, and digital comparable sales grew 1.4% even though overall comparable sales declined 3.7%.

Target relaunched a loyalty program in 2024, adding 1 million new members during the first quarter of the year. Meanwhile, its inventory at the close of the first quarter of 2024 was 7% lower than the previous year, helping to offset higher in-stock levels on a year-over-year basis.

Profitability

Is Target profitable?

Although growth has slowed, Target is still very profitable. In 2023, the company brought in net earnings of $4.1 billion, an almost 50% improvement from 2022. The company reported operating cash flow of $8.6 billion, more than double its 2022 amount.

Net earnings in the first quarter of 2024 were down slightly year over year, but still totaled a $942 million. Operating activities also provided $1.1 billion in cash for Target stock in early 2024.

Dividends

Does Target pay a dividend?

Target pays a regular quarterly dividend. It maintained its dividend through the pandemic and has paid a dividend every single year since October 1967, when the company went public.

Its dividend for the third quarter of 2024 will be its 228th consecutive one paid since the company's initial public offering (IPO) and the 53rd consecutive year in which Target has increased its annual dividend.

The company recently increased its quarterly dividend by 1.8%, setting a quarterly dividend of $1.12 per common share. As of mid-2024, the company had a forward dividend yield of more than 3% while maintaining a payout ratio of almost 50%.

ETFs

ETFs with exposure to Target

If you don't want to buy individual shares of Target stock, exchange-traded funds (ETFs) are a fantastic option for some investors who want to become part-owner in multiple stocks, including Target stock, without having direct exposure through single shares of the company.

The Vanguard Total Stock Market Index Fund (VTSAX -0.06%), the Vanguard 500 Index Fund (VFIAX -0.16%), the American Balanced Fund (ABALX 0.09%), and the Fidelity 500 Index Fund (FXAIX -0.15%) are several options for passive investment in Target. You may also want to consider the SPDR S&P 500 ETF Trust (SPY -0.48%), iShares Core S&P 500 ETF (IVV -0.48%), or the Vanguard Index-Value Index Fund (VVIAX -0.35%).

Stock splits

Will Target stock split?

Target has split several times in the company's history. These splits include:

• A 2-for-1 split on December 1, 1981.
• A 2-for-1 split on July 25, 1983.
• A 3-for-1 split on July 18, 1996.
• A 2-for-1 split on May 1, 1998.
• A 2-for-1 split on July 20, 2000.

Related investing topics

The bottom line on Target

Target's position as a top retailer nationwide, its strong underlying profitability, and its robust cash position could all tempt some investors to take a second look at the stock. The company also pays regular dividends, and it has an enviable history of maintaining and raising its dividend in a wide range of market environments.

Slowing growth, increased competition, and high inventory levels have dragged sales down. For investors willing to stay along for the ride during the transition period Target is going through and who believe that this is a hurdle that the company can overcome, the ability to receive steady dividend income and invest in a mainstay retailer may make the stock worth a second look.

FAQ