If you thought that Target (NYSE:TGT) might finally be getting out in front of its operational problems, I have bad news. The company is still haunted by its data breach, and there's a long way to go to rebuild customer confidence and brand strength that have been hampering sales, and dragging down the company's earnings at the same time.

In the first six months of the year, Target has seen earnings per share fall 40%, down to just $1.02 from $1.72 in 2013. That amounts to total income of $653 million over the six months, down from $1.1 billion last year. That's putting the squeeze on the company's dedication to returning value to shareholders, and dividend seekers might be better served elsewhere.

Target's increasingly costly dividend
Of that $653 million in earnings, Target has now paid out $545 million in dividends. That's 83% of the company's earnings sunk directly into dividends, giving investors little room for future growth, if the trend continues.

Companies pay dividends to return unneeded capital to investors, with the idea being that the investor can grow that capital better than the company can. The problem Target is running into is that there is very little spare cash to return.

While the retail business is slightly weighted toward the second half of the year -- Target generated 53% of its revenue in the second half of 2013 -- it's not enough to make this cash concern go away.

Getting back in the revenue game
Target's bottom line issues can be linked right back up to its top line. Comparable sales are suffering, down 0.2% in the first half of the year. That's led to less coming in and therefore less can come out, back into the pockets of shareholders.

To that end, Target hasn't been buying shares back this year. The company spent around $35 million on buying back some shares as part of a legal settlement, but beyond that, it hasn't used share buy backs as a way to return money to investors.

In the first quarter, the company said that the reason it needed to hold on to the cash was to keep its credit rating high with the rating agencies. At the end of Target's last year, S&P dropped the retailer's rating down one notch to an 'A' from an 'A+'. Meanwhile, Moody's has said that the departure of Target's CEO could potentially hurt the company's rating with that agency, calling it a "credit negative." 

Instability at Target
If you're sensing a theme to the news, it's that things have been shifting at Target since the data breach. The company tried to get back on top of things by changing some management members and getting back to basics, but so far it hasn't stuck. The trouble is that the company can't get its feet firmly planted beneath it.

The data breach seems like it was old news, and then Home Depot got the same treatment, bringing Target's failure back to light. The economy has started to stabilize, but consumers are still holding onto their checkbooks -- do people use checks anymore -- with an iron grip. All of that has given Target too many moving pieces to corral, leaving it sputtering as the end of the year rolls around.

Where Target goes from here
Target has plenty of long-term potential, and Moody's has said that it expects the company's free cash flow position to improve shortly. If the company can manage that, then maybe it can continue to sustain the dividend growth that it's been pumping out since time immemorial -- Target is upping its dividend again this year, by the way.

While I don't think Target has what it takes to be one of the top dividend stocks, it's still a nice player. The current yield is 3.42% and Target has been paying out a dividend for 188 consecutive quarters -- that's not a typo. Investors just looking for consistency in payment might be in luck, but don't be surprised if growth has to take a year off while the company gets its house in order.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.