TJX Up on 21% Dividend Hike - Analyst Blog

Discount retailer The TJX Companies Inc. TJX is geared to boost shareholders returns and recently hiked its quarterly dividend by 21%. This marks the 18^th consecutive year in which the company hiked its quarterly dividend.

TJX Companies will now pay a quarterly dividend of 17.5 cents per share on Jun 5, 2014 to shareholders of record as of May 15. The increased dividend is equivalent to an annual dividend of 70 cents per share for fiscal 2014, up from 58 cents per share for fiscal 2013. The new dividend will yield 1.1% annually. Last year, the company increased quarterly dividend by 26% to 14.5 cents

TJX Companies consistently returns value to its shareholders and in it's recently concluded fiscal 2014 the company returned a total of $1.9 billion cash to its shareholders through share repurchase and dividend programs. It also announced its plan to repurchase approximately $1.6 to $1.7 billion of common stocks during fiscal 2015 at the earnings conference call.

The increased dividend reflects the company's sound financial position. Apart from enhancing shareholders return, dividend increase improves the market value of the stock. TJX Companies rose 0.89% to close at $61.19 at market close on Apr 1, 2014.

The dividend hike comes on the heels of lower-than-expected earnings in fourth quarter and fiscal 2014. Earnings per share of 81 cents were ahead of the year-ago results by 9% and management's guidance range of 77 to 80 cents. However, results missed the Zacks Consensus Estimate by 2.4% due to lower sales caused by ice storms which hit a major part of the U.S. in January and February.

Net sales also missed the Zacks Consensus Estimate by 1.2% as the bad weather prevented shoppers from venturing outdoors and consequently affected store sales. Moreover, a massive ice storm in Europe just prior to Christmas impacted the company's Home goods and Marmaxx divisions.

However, we are positive on the Zacks Rank #3 (Hold) company's sound long-term fundamentals. Although management provided a conservative outlook for first-quarter fiscal 2015, we feel the company will meet its expectations as it has started the quarter with low inventory. Aggressive discounts offered in January helped the company shed most of its stock, resulting in low inventory levels

This will help the company to optimize its stocks with spring fashions which should boost traffic in its stores in the spring selling season. However, the scenario at other discount retailers like Fred's Inc. FRED, Francesca's Holdings Corp. FRAN and Ross Stores Inc. ROST is different as they were left with piles of unsold inventory from the previous quarter.