Last update on 2024-06-27

TJX Companies (TJX) - Dividend Analysis (Final Score: 6/8)

In-depth analysis of TJX Companies' (TJX) dividend policy with a favorable final score of 6/8, showcasing its stability and performance through an 8-criteria system.

Short Analysis - Dividend Score: 6

We're running TJX Companies (TJX) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is the ratio of a company's annual dividend compared to its share price. It provides insights into the return on investment from dividends alone.

TJX Companies' dividend yield of 1.3794% is notably higher than the industry average of 0.98%. Over the past 20 years, TJX's yield has mostly stayed above the industry average, except for a few years. This suggests that TJX is committed to providing significant returns to its shareholders through dividends. Such a trend is favorable as it indicates a stable and possibly growing dividend payment to investors. The consistency and growth in dividends per share from 0.0338 in 2003 to 1.294 in 2023 further reinforce this positive trend.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate (DGR) calculates the annualized percentage rate of growth of a company's dividend. Consistent growth in dividends typically signifies a company's profitability and financial health, which is crucial for income-focused investors.

The data for TJX Companies (TJX) from 2003 to 2023 shows various dividend per share ratios that are rather erratic. Notably, there were significant fluctuations including negative growth in 2020 (-74.0113%) and enormous spikes (352.1739%) in 2021. This inconsistency makes it difficult to determine a stable and positive growth rate. Additionally, the average growth is 32.6121%, which represents more volatility than steady growth. While an average may seem positive, reliable dividend growth requires consistency. Given these variances, the dividend growth rate does not meet the criterion of stable growth beyond 5%, indicating a bad trend for income-focused investors.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio measures the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. A lower payout ratio indicates that the company is retaining more earnings for growth.

The average payout ratio for TJX Companies over the last 20 years is 89.7983%, which is significantly higher than the recommended threshold of 65%. This indicates a trend where a substantial portion of earnings is being allocated to dividends rather than being retained for growth or reinvestment. While a high payout ratio can be attractive to income-focused investors, it may also signal potential limitations in the company's capacity to invest in future expansion and to weather periods of lower profitability. Notably, the payout ratio spiked to 1386.6667% in 2021, likely due to a significant drop in earnings amid higher dividend payments, which may not be sustainable in the long run. Overall, this trend is concerning for those looking for a balance between income and growth.

Dividends Well Covered by Earnings?

Dividends being well covered by earnings means that the company generates sufficient profit to pay out its dividends from its earnings. This is crucial to determine the sustainability of the dividend payouts.

Analyzing the data from 2003 to 2023 for TJX Companies, we observe that the coverage ratio where earnings per share (EPS) are divided by dividend per share (DPS) remains consistently healthy, demonstrating the firm's strong profit capabilities. Notably, the 2021 ratio dramatically spikes, although likely due to an anomaly (e.g., pandemic recovery effects). Overall, a rising trend indicates that dividends have become increasingly well-covered over the years, a positive indicator of sustainability and potential growth in dividend payouts.

Dividends Well Covered by Cash Flow?

Explain the criterion for TJX Companies (TJX) and why it is important to consider

Free cash flow (FCF) is the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. It's a critical measure because it shows how effectively a company is able to generate cash to pay for dividends, repurchase shares, reduce debt, or reinvest in its business. If dividends are well covered by free cash flow, it adds a layer of safety for investors who expect consistent dividend payments. It assures that the company is generating sufficient cash to sustain dividend payments without compromising financial flexibility.

Stable Dividends Since the Company Began Paying Dividends?

Explain the criterion for TJX Companies (TJX) and why it is important to consider

The history of stable dividend payments over a long-term horizon, such as the past 20 years, signifies TJX Companies' commitment to returning value to shareholders. It also qualifies the company as a reliable income-generating investment. Consistency in dividends is crucial for income-seeking investors as it provides financial predictability and a regular income stream.

Dividends Paid for Over 25 Years?

Dividends Paid for Over 25 Years is a measure of a company's long-term stability and commitment to returning value to shareholders. It indicates the reliability of a company in terms of generating consistent profits.

TJX Companies (TJX) has demonstrated a strong commitment to its shareholders by consistently paying dividends for over 25 years. Starting from $0.0144 in 1998, the company has increased its dividend per share steadily to $1.294 by 2023. This consistent upward trend in dividend payments reflects solid financial health and reliable profit generation. However, there was a noticeable drop to $0.23 in 2020, which could be attributed to the financial uncertainties during the COVID-19 pandemic. Despite this drop, the rapid recovery to $1.04 in 2021 and steady growth afterward is a positive indicator of the company's resilience. Overall, this trend is good for investors, signaling stable and growing returns over a long period.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases are an indicator of a company's commitment to reducing share count, which can positively impact per-share metrics and signal shareholder-friendly policies.

Over the past 20 years, TJX Companies have consistently engaged in share repurchase activities. The data shows a marked reduction in the number of shares from 2,150,960,000 in 2003 to 1,166,000,000 in 2023. This consistent decrease year-over-year, except in 2022, highlights a commitment to buybacks, which is a positive sign for investors. On average, the company repurchased shares at a rate of -3.0043% per year, indicating a proactive strategy to return value to shareholders. The persistent reduction in shares outstanding often helps improve earnings per share (EPS), contributing to potentially higher stock prices over the long term. The commitment to buybacks, evidenced by the reliable repurchase years listed, speaks to the firm's robust free cash flow generation and prudent capital management, making it a favorable trend for shareholders.