TJX Companies (NYSE:TJX) Is Increasing Its Dividend To $0.425

The TJX Companies, Inc. (NYSE:TJX) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of June to $0.425. Although the dividend is now higher, the yield is only 1.3%, which is below the industry average.

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TJX Companies' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, TJX Companies was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 31.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

View our latest analysis for TJX Companies

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.35 in 2015 to the most recent total annual payment of $1.70. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

We Could See TJX Companies' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. TJX Companies has seen EPS rising for the last five years, at 10.0% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for TJX Companies' prospects of growing its dividend payments in the future.

TJX Companies Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for TJX Companies that investors should take into consideration. Is TJX Companies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.