TJX Companies' (NYSE:TJX) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of The TJX Companies, Inc. (NYSE:TJX) has announced that it will be paying its dividend of $0.375 on the 6th of June, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.

See our latest analysis for TJX Companies

TJX Companies' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, TJX Companies' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 29.8%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was $0.29, compared to the most recent full-year payment of $1.50. This means that it has been growing its distributions at 18% per annum 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.

TJX Companies Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that TJX Companies has been growing its earnings per share at 9.9% a year over the past five years. TJX Companies definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

TJX Companies Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that TJX Companies is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for TJX Companies that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.