Dividend Growth Stock Overview: TJX Companies Inc.

Photo: Flickr.com/Nicholas Eckhart

About TJX Companies

The TJX Companies operate the T.J. Maxx, Marshalls and HomeGoods chains in the United States, the Winners, HomeSense and Marshalls chains in Canada, and the T.K. Maxx and HomeSense chains in several countries across Europe. The company core competency is in chains sell off-price apparel and home furnishings. TJX has over 3,300 stores across all its chains and employs nearly 200,000 people, most of them on a part-time basis.

TJX’s history goes back to 1919, when brothers Max and Morris Feldberg founded the New England Trading Company in Boston, MA. In 1929, the brothers opened their first retail store, which was dedicated to selling ladies hosiery. The Feldbergs continued to expand through the ‘30s and ‘40s and by 1949 they had a chain of women’s apparel stores stretching from New England to Washington, D.C.

In 1956 the founder’s sons, Sumner and Stanley Feldberg opened the first Zayre discount department store in Hyannis, MA. Six years later the Zayre chain began trading publicly on the NYSE.

Twenty years later, the company made a major decision to develop a new chain of discount retail stores focusing on apparel and home décor products. The first two T.J. Maxx stores opened in 1977 in Auburn and Worcester, MA. Over the next two decades, Zayre would acquire smaller discount retailers and develop a mail order catalog business. By 1989, the company had changed its name to The TJX Companies. The company’s business included the T.J. Maxx and Hit or Miss chains and the Chadwick’s of Boston mail order business.

TJX expanded into Canada in 1990 with the purchase of Winners Apparel; in 1992, the company launched the HomeGoods chain to focus exclusively on home décor products. TJX also acquired the Marshall’s chain in 1995. Since then, TJX has expanded into the United Kingdom, Ireland, Germany and Poland with the T.K. Maxx brand (an overseas version of T.J. Maxx) and plans further expansion into Austria and The Netherlands.

TJX divides its business into 4 divisions. The Marmaxx Group operates the company’s T. J. Maxx and Marshall’s 2,094 stores in the U.S.; the HomeGoods division operates the 487 HomeGoods stores in the U.S.; and TJX Canada and TJX Europe are responsible for the company’s operations in Canada (368 stores) and Europe (450 stores), respectively.

In fiscal year 2015 (which ended January 31, 2015), the company had sales of $29.1 billion, up 6.0% from FY 2014. The sales increase was due to new stores (4%) and increases in same store sales (2%). Of the $29.1 billion in sales, nearly two-thirds were from the Marmaxx division, with the remaining sales roughly evenly split between the HomeGoods, TJX Canada and TJX Europe divisions. Geographically, 76% of TJX’s sales come from the U.S. Based on category, 57% of company sales come from apparel, 29% from home fashion and 14% from jewelry.

Earnings per share were up 7.1% to $3.15 in FY2015, reflecting both a 3.6% increase in income and a 3.1% reduction in the number of outstanding shares. Since most of TJX’s sales come from the U.S., there was little impact from currency effects on income.

TJX expects to continue to expand and, according to the annual report, anticipates adding another 180 stores across all four divisions in FY2016.

TJX has an active share repurchase program, having initiated a $2.0 billion program in February 2015 that was announced a year prior. As of January 31, 2015, the company had repurchased 10.8 million shares at a cost of $686 million, leaving about $1.3 billion in the program. In early 2015, TJX announced its next stock repurchase program – its 16th – with an authorization of $2.0 billion. The $3.3 billion on the two programs represents 6.8% of the current shares outstanding.

The company is a member of the S&P 500 index and trades under the ticker symbol TJX.

As a member of the S&P 500, once TJX Companies has increased dividends for 25 consecutive years S&P should classify the company as an S&P Dividend Aristocrat. Given that TJX has made a conscious effort to increase the dividend each year for 19 years straight, I expect them to continue to do so. The company is currently on track to become a Dividend Aristocrat at the beginning of 2022.

TJX Companies’ Dividend and Stock Split History

TJX Companies has grown its dividend at a rate of nearly 22% a year over the last decade.

TJX Companies restarted their record of dividend growth in 1997. Since then, the company has traditionally announced dividend increases at the end of March, with the stock going ex-dividend in mid-May. The most recent dividend increase was in March 2015 when TJX announced a 20% increase to an annualized rate of 84 cents a share. I expect TJX to announce its 20th consecutive year of dividend growth in March 2016.

TJX Companies has been able to grow its business very quickly over the last 20 years and the dividend growth rate reflects this. With 20-year compounded dividend growth of almost 17%, the company has more than doubled its dividend payout every 5 years since 1995. Over the last 5 and 10 years, the dividend growth has been even faster, with compounded growth rates of 23.1% and 21.8%, respectively. Since 1995, TJX has compounded dividends at 17% annually.

TJX Companies has split its stock 4 times in the last two decades, each time 2-for-1. The company split its stock in June 1997, June 1998, May 2002 and, most recently, in February 2012. A single share purchased 20 years ago would have split into 16 shares.

Over the 5 years ending on December 31, 2014, TJX Companies stock appreciated at an annualized rate of 31.90%, from a split-adjusted $17.03 to $67.98. This dramatically outperformed the 13.0% compounded return of the S&P 500 index over the same period.

TJX Companies’ Direct Purchase and Dividend Reinvestment Plans

TJX Companies does not have a direct purchase or dividend reinvestment plan. In order to invest in TJX Companies’ stock, you’ll need to purchase it through a broker. Most brokers will allow you to reinvest dividends without any fee. Ask your broker for more information on how to set this up if you are interested.

Helpful Links

TJX Companies’ Investor Relations Website

Current quote and financial summary for TJX Companies (finviz.com)

 

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2 Comments

  1. Thanks for taking the time to put this analysis together. THe yield is a little low and the PE ratio is a little high for me at the moment. If I am going to purchase a stock at a premium, I’ll look towardsa company like PEP. However, that doesn’t mean it is a great company. I didn’t realize they have had such great dividend growth and stock appreciation over the years. Our household shops at TJMax a lot, so we have contributed to their success over the years!

    Have a great weekend.

    Bert, One of the Dividend Diplomats

    • Jason says:

      Hi Bert-
      I agree that the company is fairly valued here, and I’ve received a lot of comments at SeekingAlpha.com about how people like to shop at TJ Maxx but didn’t know about the outstanding dividend growth record.

      Thanks for the comment!

      Cheers,
      HD