The Motley Fool: Fallen stock and boosted dividend

Target (NYSE: TGT) is a dividend powerhouse, having increased its payout for 54 consecutive years, but the company has been struggling. A turnaround may not happen this year, but if you believe that it will happen, you can collect a hefty dividend payment while you wait.

Target faces multiple challenges. Some, such as declining consumer confidence tied to uncertainty about the effects of the Trump administration’s tariffs, are largely outside of its control. But other issues are the result of the company’s own moves. Target has faced customer backlash after rolling back diversity, equity and inclusion (DEI) efforts. Foot traffic has reportedly fallen for several months in a row, including a 3.9% year-over-year drop for June, per retail news outlet Retail Brew.

To get back on track, Target is changing up its leadership team. It has replaced the role of its chief strategy officer with a group of experienced insiders. A Target veteran is now CEO.

Thanks mainly to its stock sinking over the last 12 months (it was down nearly 39% as of early September), the company’s dividend yield has been pushed up to a recent 4.9. Meanwhile, the company continues to generate solid profits. Its stock is also valued attractively, with a forward-looking price-to-earnings ratio below 13, well under its five-year average of 16. (The Motley Fool owns shares of and recommends Target.)

Ask the Fool

Q. What’s a company’s book value? – R.S., Anchorage, Kentucky

A. It’s an accounting measure reflecting the company’s total assets less its total liabilities – in other words, it’s shareholder equity, or what shareholders might get if the company were liquidated and debts and obligations were covered.

Book value is not as useful a measure as it used to be, though. It worked well when most businesses were simpler and capital-intensive, with assets such as factories, equipment and land appearing on the balance sheet. Today, though, more companies are service-oriented; high-tech companies may have lots of intangible assets, such as patents and goodwill (an accounting measure often involved in acquisitions).

Consider the ride-sharing company Uber Technologies, for example. As of June 30, its total assets were nearly $56 billion and total liabilities more than $32 billion, which leaves shareholder equity (book value) of roughly $23 billion. That’s far less than its recent market value of around $190 billion.

Meanwhile, imagine a company that owns lots of buildings: Over many years, their value on the balance sheet will be depreciated, perhaps to zero. They’re not really worth zero, of course, and they may even appreciate in value over time. Such a company can also be worth much more than its book value.

It’s often better to ignore book value, but value investors sometimes calculate companies’ price-to-book ratios to help identify undervalued stocks. Research book value further if you’re so inclined.

Q. What’s a “basis point”? – G.M., Bremerton, Washington

A. It’s 1/100th of a percentage point, or 0.01%. One hundred basis points make up 1%. So if an interest rate falls by 25 basis points, it’s down a quarter of a percentage point.

My smartest investment

Here’s my smartest investment story: In 1992, I was in a traffic accident in which my 13-year-old daughter was injured. We got a payout of $15,000, and we gave $5,000 each to our daughter and her 11-year-old brother. They each invested $2,000 in a certificate of deposit, $1,500 in a mutual fund and $1,500 in stocks. When our son was old enough to get a summer job, he said “My investments now are at $9,000. I don’t need a summer job!” Now both kids are adults with great portfolios, and a lot of investment knowledge that they learned from a young age. – M.M., via email

The Fool responds: What a great story! And parents don’t even need a car accident or windfall to do the same thing. If you’re starting with just a little money, you and your kids can buy shares of low-fee index-fund exchange-traded funds (ETFs) – such as the Vanguard S&P 500 ETF (VOO) – or some shares of stocks. Your kids can learn more in “The Motley Fool Investment Guide for Teens: 8 Steps To Having More Money Than Your Parents Ever Dreamed Of” by David and Tom Gardner with Selena Maranjian (Touchstone, $20), or in other books. Teaching kids about money early is a brilliant move that can pay off well.

Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.