It looks like The TJX Companies, Inc. (NYSE:TJX) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase TJX Companies’ shares before the 10th of August to receive the dividend, which will be paid on the 1st of September.
The company’s next dividend payment will be US$0.29 per share, on the back of last year when the company paid a total of US$1.18 to shareholders. Last year’s total dividend payments show that TJX Companies has a trailing yield of 1.9% on the current share price of $62.82. If you buy this business for its dividend, you should have an idea of whether TJX Companies’ dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it’s growing.
View our latest analysis for TJX Companies
Dividends are typically paid from company earnings. If a company pays more in dividends than it earns in profit, then the dividend could be unsustainable. TJX Companies paid out a comfortable 38% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.
It’s positive to see that TJX Companies’ dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we’re glad to see TJX Companies’ earnings per share have risen 10% per annum over the last five years. TJX Companies has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, TJX Companies has raised its dividend by approximately 20% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is TJX Companies worth buying for its dividend? From a dividend perspective, we’re encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It’s a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that the stock currently faces. To that end, you should learn about the 3 warning signs we’ve spotted with TJX Companies (including 1 which shouldn’t be ignored).
Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s A curated list of interesting stocks that are 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.
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