TJX May Skip Next Dividend Payment; No Plan to Sell Our Shares
On March 20, we published a note detailing actions that TJX was taking to strengthen the firm's financial position in the wake of nationwide store closures.
One somewhat surprising component of TJX's plan was to reevaluate its dividend, which the retailer has increased every year since going public in 1987.
About a week later, the company filed its annual 10-K report with the Securities and Exchange Commission (SEC) and made the following remark:
One somewhat surprising component of TJX's plan was to reevaluate its dividend, which the retailer has increased every year since going public in 1987.
About a week later, the company filed its annual 10-K report with the Securities and Exchange Commission (SEC) and made the following remark:
...the Company does not intend to declare a dividend for the first quarter of fiscal 2021 (calendar year 2020), and we continue to evaluate our dividend program in the near term.
Nothing is official yet, and a lot could still change between now and the end of April, when TJX normally declares its next quarterly dividend.
Nevertheless, it appears increasingly likely that TJX will skip its next dividend payout in order to preserve cash amid continued uncertainty as to when stores will reopen and how quickly sales will rebound.
We are therefore downgrading the company's Dividend Safety Score from Borderline Safe to Unsafe. However, we expect TJX to return to paying dividends as soon as it can once the economy reopens.
In March, management also issued this statement:
While we are evaluating our dividend in the near term, I want to emphasize that we remain committed to paying our dividends whenever the environment normalizes for the long term, as we have been for decades...
Depending on how soon stores can reopen and when the dividend returns, TJX's Dividend Safety Score could be upgraded quickly.
Importantly, TJX is still on strong financial footing. The firm had $3.2 billion of cash as of February and added another $1 billion by tapping its credit revolver.
For context, the firm's operating expenses totaled about $7.5 billion last year, the majority of which was presumably for payroll, which should drop considerably once employees are furloughed starting April 11.
In other words, the firm likely has well over a year of runway in the bank if stores were to remain closed for a prolonged period of time.
TJX maintains low leverage and an A credit rating from Standard & Poor's as well, indicating the firm should have ample access to low-cost capital if needed.
Overall, we remain optimistic about TJX's long-term outlook. Based on what we know today, we plan to continue holding our shares of TJX in our Long-term Dividend Growth Portfolio, even if the firm temporarily suspends its dividend.
