Target Stock Is Down 63% — Buy the Dip?

August 25, 2025

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Hey, Zach here!

Target just plunged 6% after earnings—now 63% off all-time highs and sporting one of its highest dividend yields ever. Is this a value trap or a chance to lock in income? In today’s issue, I break down exactly what happened, what the Street expects next, and where fair value lands based on my models.

Today’s topics:

  1. Target Stock Is Down 63% — Buy the Dip?

  2. MO Raises Dividend Again!

  3. My New Buys

  4. Fantasy Football? (Last Chance)

The Key Story

Target Stock Is Down 63% — Buy the Dip?

Why the sell-off (0:00)

  • Target (TGT) dropped ~6% after earnings and is now ~63% off all-time highs.

  • Dividend yield is near historical highs; last time it was this elevated (2017), buying then led to strong returns:

    • Aug 2021 total return: +432% from that 2017 window.

    • Even after recent weakness: +126% total return.

  • Dividend growth has cycled before. Post-pandemic, TGT hiked 32% (2021) and 20% (2022), but growth has since slowed to just under ~2% annually.

  • 10-yr dividend CAGR: 8.17%.

  • Earnings fell hard post-pandemic: rebound in 2023, declining again in 2024–2025; FY EPS growth projected –16.4%.

Dividend Data update (3:01)

  • Massive platform upgrade: coverage expanded from 8,000 → 80,000+ tickers.

  • Now includes international stocks (e.g., LVMH), ETFs & mutual funds (e.g., SCHD) with custom views (expense ratios, holdings) plus full dividend histories and growth rates.

  • Track portfolios and projected dividend income. Follow along at DividendData.com.

Earnings & Stock Analysis (4:02)

  • Q2 earnings reported Wed, Aug 20.

  • Leadership: Board elected Michael Fideli as CEO effective early 2026; Brian Cornell to step down. Adds uncertainty.

  • New CEO priorities:

    • Recapture merchandising authority

    • Improve guest experience (stores + online)

    • Leverage tech for speed/efficiency/experience

  • Guidance reaffirmed: Low single-digit decline in comps; FY adj. EPS $7–$9.

    • Street FY EPS: $7.28 (low end of guidance).

    • At $7 EPS, TGT trades at ~13.5×—cheap in today’s market.

    • Analysts model single-digit EPS growth; by 2030 EPS ~$9.59, implying ~10.2× on today’s price.

Buy or Sell? (7:00)

  • I wouldn’t rush to buy; likely stays cheap for a few quarters. Keep it on the watchlist.

  • Dividend profile: Dividend Aristocrat (25+ years); may even be a Dividend King.

    • Last year: FCF payout 45%, EPS payout 50% (sustainable).

    • Using $7 EPS and $4.56 dividend, forward payout ~65%.

    • Risk isn’t a cut; risk is slow growth (~2%) and opportunity cost vs. better setups elsewhere.

  • 2017 analogy shows growth can re-accelerate—but pandemic-era EPS likely an outlier for many retailers.

Price Target (7:44)

  • Consensus PT: $127 (implies +28.77% upside).

  • Low PT: $94 (shares near the low end).

  • Analyst ratings: 49% Buy / 25% Hold / 7% Sell (split view).

DCF Valuation (8:12)

  • Conservative case: Low growth, FCF recovering to ~$3.4B by 2030 → $90 fair value (~8% downside).

  • More optimistic: FCF rebounds to $4B by 2030 → $112 fair value (~13.8% upside).

DDM Valuation (9:40)

  • 3% dividend growth, 10% discount → ~$64.59 present value (well below current).

  • Even at 5% growth, still below price. (DDM is strict and better for high-yield names.)

My Thoughts (10:26)

  • I’m not buying yet—I see better opportunities today.

  • If TGT keeps falling, the yield becomes compelling for investors seeking a reliable, slowly growing dividend.

  • It’s a watchlist income play—sustainable dividend, potential long-term compounding, but patience is key.

Short Break

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Dividend News

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– Zach
Founder, Dividend Data

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Disclaimer: Dividend Dividend (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes. Dividend Data (Dividend Data LLC) is not a replacement for a professional's opinion. Contributors to the Dividend Data (Dividend Data LLC) might have equities mentioned in the newsletter