57-year-old Dividend King makes $5 billion move to protect payout

Core Viewpoint - Target Corporation is facing significant challenges as it navigates a "period of transformation" with softening sales and margin pressures, while aiming to maintain its long-standing dividend growth streak of 57 years through a $5 billion capital investment in 2026 [1][2]. Financial Performance - Target's stock has declined by 40% over the past five years, contrasting with broader market performance, leading to a projected dividend yield of 4% for 2026 [3]. - Adjusted earnings per share are expected to decrease from $13.56 in fiscal 2022 to $8.86 in 2025, with forecasts suggesting a further drop to $7.30 in fiscal 2026 [3]. Dividend Sustainability - Target is projected to have a free cash flow of $2.47 billion in fiscal 2026, down from $4.48 billion in 2025, with an annual dividend expense of $2.06 billion, resulting in a high payout ratio of approximately 83.4% [4][8]. - Analysts predict free cash flow will further decline to $1.8 billion in fiscal 2027, potentially pushing the payout ratio above 100% [4]. Operational Strategy - The company is actively restructuring by eliminating 1,800 headquarters roles (an 8% reduction) to enhance decision-making speed and streamline operations [2]. - Target's strategy includes transforming stores into shipping centers to improve operational efficiency and profit margins [10]. Dividend Metrics - Target's quarterly dividend is $1.14 per share, leading to an annual dividend of $4.56 per share, with a five-year dividend growth rate of approximately 11% annually [11].