Friday, November 10, 2017

Kohl's or Target which call is better for income investors

I invest for income.  I need a dividend; I need a dividend that grows; I like low risk of bankruptcy and I love covered calls.   Not a unique strategy.   Many successful investors who live off of their portfolio income invest with a similar strategy.

In the retail space, we find low valuations and quite a bit of volatility.  Everybody has an opinion and it can change on a dime.  I named Kohl's, symbol KSS, as my first Dividend Machine pick for 2017 and it has been up and down.  Most significantly, though, is the cash it spins off to me through the dividend and through calls.

Target is a similar story.   In the charts below, you can see that Kohl's has a better call than Target.










Moreover, Kohl's has a higher dividend than Target:  KSS = 5.39%  yield TGT = 4.25% yield.
Kohl's most recent dividend increase is better:  KSS = 10% dividend increase TGT = 3.33% dividend increase.
Kohl's is a bit cheaper using P/E ratio:  KSS = 11.3 P/E ratio TGT = 12.26 P/E ratio.
Percent of earnings paid out in dividends is again won by KSS:  KSS 50% payout ratio TGT = 61.2% payout ratio.
Lastly, KSS beats TGT on D/E (debt to equity ratio):  KSS = .5561 D/E ratio TGT = 1.103 D/E ratio.

Put it all together and KSS is a nice stock in a volatile space that will reward the income investor with high dividend yield, robust dividend growth, and covered call option opportunity.

M* MoneyMadam
Disclosure:  long KSS with calls long TGT

http://www.themoneymadam.com/2017/01/kohls-kss-first-2017-dividend-machine.html

http://www.themoneymadam.com/2017/04/covered-calls-2-edged-sword-gild-kss.html

http://www.themoneymadam.com/2017/05/kohls-kss-option.html

http://www.themoneymadam.com/2017/07/income-investors-should-consider-kss.html