Target (TGT)  – Dividend Lead-up Capture Trade Analysis – July 29th 2017

Target (TGT) – Dividend Lead-up Capture Trade Analysis – July 29th 2017

On September 9th 2017, Target (NYSE:TGT) will pay its regular $0.62 per share quarterly dividend.

Target has given investors a pay raise every year starting in 1972. That’s 45 consecutive years of dividend increases giving them the title of Dividend Champion. But did you know that you’d only have to hold Target shares for one day, August 14th, to collect that payment. To put it another way, you could buy shares on August 14th, sell them on August 15th, and still collect the dividend.

Here’s the way it works. August 14th is the “ex-dividend date” for Target. This means that buyers on August 14th are buying the shares “excluding the dividend.” But anyone who bought prior to August 14th, and doesn’t sell, will get the dividend.

That you only need to own a stock for one day to collect the dividend has inspired many investors to pursue a “dividend capture” strategy, which involves holding a stock just long enough to collect the dividend, selling at or above their purchase price, and then moving on to the next trade.

Our strategy is different. The trading strategy we will use is to look for an entry point to buy shares from approximately 2 weeks before August 14th (the Ex-dividend date). Once we have the position – we will sell the share price increases by more than 2%. Ideally we will close out before the Ex-dividend date.

This is not an easy strategy by any means as the theory is that the price will move down by the amount of the dividend on the Ex date. This said there are many different forces at work on the stock price and what our analysis is focused on is finding a good entry price to buy the stock which maximises the probability of a profit.

Some of the key financial measures of Target are shown below.

You can see the forecasted dividends for Target (TGT) below.
Forecasted Dividends for Target (TGT)

DateDividend
08/14/20170.620
11/14/20170.610
02/13/20180.610
05/16/20180.625
08/15/20180.669
11/14/20180.669
02/13/20190.669
05/16/20190.638
08/15/20190.684
11/14/20190.684
02/13/20200.684
05/15/20200.724
08/14/20200.775
11/13/20200.775
02/12/20210.775
05/14/20210.724

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