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Instant Analysis: TJX Raises Its Dividend by 24%

By Eric Volkman - Apr 1, 2016 at 8:20AM

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The company declares a meaty hike to $0.26 per share.

What happened?
It might operate bargain retail chains, but TJX (TJX 4.72%) is being a relative spendthrift with its dividend. The company, most notably the owner of the T.J. Maxx and Marshalls discount clothing retailers, has raised its stockholder distribution. It will next dispense $0.26 per share, a 24% increase over the preceding payout.

IMAGE SOURCE: TJX. 

This will represent the 20th year in a row the company has raised its distribution.

TJX's new dividend will be paid on June 2 to holders of record as of May 12. Even at the enhanced amount, however, it only yields 1.3% on the most recent closing stock price. That's well under the 2.1% of dividend-paying companies on the S&P 500 index.

Does it matter?
Retail is a tough game to succeed in and tougher for retailers at the bargain end of the market. Profit margins can be thin, and it's often a challenge to move inventory.

So it's admirable when the sharper operators in the segment -- TJX, but also smaller rival Ross Stores (ROST 6.92%) -- can not only turn a buck but manage to improve results as they do so. Both companies have seen lifts in both top and bottom lines, with TJX's latest annual results climbing 33% (to $30.9 billion) and 52% (to just over $1 billion), respectively, over fiscal 2012. Ross Stores is even better, at a respective 39% (to $11.9 billion) and 55% (to just over $1 billion).

So given that the dividend yields in the segment are relatively meager -- Ross Stores' is even more anemic, at 0.9% -- we can assume that few investors put money in it for the distributions. TJX's raise, therefore, generous as it is in terms of percentage, probably won't much affect its stock or those of segment rivals.

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Stocks Mentioned

The TJX Companies, Inc. Stock Quote
The TJX Companies, Inc.
TJX
$64.11 (4.72%) $2.89
Ross Stores, Inc. Stock Quote
Ross Stores, Inc.
ROST
$86.99 (6.92%) $5.63

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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