The TJX Companies (TJX) increases dividend by 20%, but offers a below market yield.

TJX Companies’ (NYSE:TJX) dividend was increased by 20%.  Its overall yield is 1.62%. The firm started paying a dividend in 1993.

The TJX Companies is one of the largest discount retailers of brand-name and designer apparel in the country. The firm operates more than 2,800 stores.  It sells it products through the multitude of brand name stores including T.J. Maxx, Marshalls, and HomeGoods.  It also maintains over 1,000 stores outside the U.S., primarily in Canada with additional operations in U.K., Europe and Australia. The company was founded in 1956 and is based in Framingham, Massachusetts.

TJX Companies has maintained a three-year growth rate of dividends of 21 percent. TJX Companies currently ranks 3rd in dividend yield within the large cap services, department stores category. The quarterly dividend for the June payment will be $0.3125 versus the prior year rate of $0.26 per share. TJX Companies is not a member  of our Top 100 Dividend Stocks.  (see below).

The dividend will be paid at the new higher rate on June 1, 2017, to shareholders of record at close of business on May 11, 2017. The TJX Companies Inc. is currently priced at $76.90. Listed in the table below are the quarterly dividend payments since 2010.

Date Quarterly Dividend
5/11/2017 0.3125
2/7/2017 0.26
11/8/2016 0.26
8/9/2016 0.26
5/10/2016 0.26
2/9/2016 0.21
11/9/2015 0.21
8/11/2015 0.21
5/12/2015 0.21
2/10/2015 0.175
11/10/2014 0.175
8/12/2014 0.175
5/13/2014 0.175
2/11/2014 0.145
11/12/2013 0.145
8/13/2013 0.145
5/14/2013 0.145
2/12/2013 0.115
11/6/2012 0.115
8/7/2012 0.115
5/8/2012 0.115
2/7/2012 0.095
11/8/2011 0.095
8/9/2011 0.095
5/10/2011 0.095
2/8/2011 0.075
11/8/2010 0.075
8/10/2010 0.075
5/11/2010 0.075
2/9/2010 0.06

Analysis of TJX Companies is based upon our five key criteria for the Top 100 list, which include;

Category Value Score
Dividend Yield 1.62% 415
Dividend Growth (3-7 year avg) 21.9 108
Forward P/E 18.29 279
S&P Financial Rating A+ 175
Beta 0.85 130
Total Score 1,107
% Yield 3 Year Div. Growth Rate 7 Year Div. Growth Rate SPS 2016 P/S Ratio 10 yr P/S Low 10 yr P/S High 5 yr low Yield % 5 yr max Yield %
1.62% 21 22.6 56.20 1.37 0.67 1.75 0.85% 1.62%

Positives;

  • TJX Companies maintains an investment grade rating of A+.
  • TJX Companies’ current dividend yield (1.62%) is at the top of its five-year average historical dividend yield.
  • TJX Companies maintains a beta of 0.85, lower than the average company.
  • TJX Companies has paid out a dividend consecutively for the past 24 years.

Negatives;

  • TJX Companies is trading above its ten-year average price/sales (P/S) ratio.
  • TJX Companies’ dividend yield is below that of the S&P 500 Index.

Latest Earnings & Overall Analysis:

TJX Companies issued its earnings data on February 22nd. The company reported $1.03 EPS for the quarter, topping the consensus estimate of $1.00 by $0.03. Sales were once again very strong, rising by 7 percent versus last year’s 6 percent gain for the full year. Earnings per share for calendar year 2016 was $3.53, above analyst expectations. The retail firm maintained a remarkable $33 billion in sales for last year. Wage growth pressured the firm’s earnings by 3 percent.  Negative currency translations were also poor resulting in a 5 percent reduction in earnings per share for 2016.

 

The HomeGoods division posted impressive results, with sales up 5 percent on a year-over-year basis. Sales within this segment were nearly $4 billion.  TJX Canada also had strong revenue growth with a 14 percent increase from 2015.  The Canadian operations now has over 400 stores and nearly $3 billion in sales.   Free cash flow came in at just over $2.5 billion for the previous twelve months.  Additionally, stock buybacks and dividends to shareholders came in at $2.4 billion.

TJX Companies offers investors one of the best growth profiles. It not is only strong here in the U.S., but also overseas. It dominates the off-price retail arena with its T.J. Maxx and Marshalls franchises.  And through it newer HomeGoods and Sierra Trading Post operations, it has moved into faster growing markets.  Most analysts project the firm has room for an additional 1000 stores globally.  This is in stark comparison to firms like Macy’s and Nordstrom, which are cutting retail stores.

Because of its immense size now, it has given the retailer superior bargaining power versus vendors. This includes not just apparel, but now household inventory to compete better with furniture firms. It also takes “extra” inventory, allowing it get larger discounts on name brand products.  Overall the firm is no doubt a leader in its industry. Despite this superior profile, the stock has not advanced as rapidly as many other firms. This has kept valuation favorable. However, despite the 20 percent rise in dividend, the firm still maintains a yield below the S&P 500.

The firm does maintain a low beta, stellar credit rating, and strong dividend growth rate. However, its low dividend yield and higher than normal price/sales ratio are negatives. Its payout ratio at just over 30 percent is too low as well while its forward price/earnings ratio is above that of the market.

2016 2015 2014 2013 2012
Earnings per Share 3.5 3.33 3.15 2.83 2.55
Annual Dividend 1.04 0.84 0.7 0.58 0.46
Payout Ratio 29.71% 25.23% 22.22% 20.49% 18.04%
Earnings per Share 2017 (projected) $3.83
Dividend $1.25
Payout Ratio 32.89%

Based on the firm’s P/S ratio above 1 and below average dividend yield, TJX Companies Inc. does not qualify as one of our Top 100 Dividend Stocks

The TJX Companies Inc. Dividend Yield Chart (Click to enlarge)

Chart Explanation:  Dividend growth stocks may be viewed undervalued when the current yield is above historical readings for the past 5 years. 

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