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TJX Companies’ Stock Reaction and Dividend Announcement after 4Q16 Results

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Stock jumps on 4Q16 results

Strong results for the fourth quarter of fiscal 2016 boosted TJX Companies’ (TJX) stock by 2.1% to $74.24 on February 24, 2016. TJX’s stock price has increased by 4.8% since the start of 2016, while the stock prices of peers Ross Stores (ROST), Burlington Stores (BURL), and Nordstrom (JWN) are up 3.5%, 30.6%, and 3.6%, respectively, on a YTD (year-to-date) basis, as of the same day. The stock price of Burlington Stores received a major boost in January 2016, when the company reaffirmed its guidance for the fourth quarter and full year at the low end of previously stated ranges.

By comparison, the Consumer Discretionary Select Sector SPDR Fund (XLY) and the S&P 500 Index have declined by 3.4% and 4.1%, respectively, YTD.

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Dividends and share repurchases

TJX Companies plans to increase its quarterly dividend to be declared in March 2016, payable in June 2016, by 24% to $0.26 per share. This marks the 20th consecutive year of dividend increases for the company. The current dividend yield of TJX Companies is 1.1%, higher than Ross Stores’ 0.8%. Burlington Stores does not currently pay any dividends.

Aside from dividends, TJX Companies also plans to reward shareholders through share repurchases or buybacks. In fiscal 2016, the company spent $1.8 billion to repurchase 26.5 million shares. TJX plans to repurchase around $1.5–$2 billion of its stock during fiscal 2017, ending January 28, 2017. The company’s existing stock repurchase program allows the repurchase of $1.5 billion of its stock, and the new repurchase program will allow the repurchase of an additional $2 billion of the company’s common stock.

Analyst recommendations

As of February 24, 79% of analysts, or 26 out of 33, have issued “buy” recommendations for TJX Companies, and seven analysts have issued “hold” ratings. None of the analysts has issued a “sell” recommendation. The consensus “buy” rating for TJX Companies’ stock is supported by its consistent performance. The 12-month price target for TJX Companies’ stock is $82.33, which represents a 10.9% upside potential from the company’s stock price on February 24.

We’ll discuss the company’s outlook and valuation in the concluding part of this series.

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