TJX Dividend Hike Illustrates Company's Solid Cash Flow

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 |  About: TJX Companies Inc. (TJX)
by: William Trent, CFA
Large Cap Watch List TJX Companies announced a sizable dividend hike yesterday:

The TJX Companies, Inc., the leading off-price retailer of apparel and home fashions in the U.S. and worldwide . . . announced that its Board of Directors declared a regular quarterly dividend in the amount of $.09 per share, representing a 29% increase in the per share amount from the last dividend paid.

Giving the company a quick once-over, it is easy to recall how it made it onto our Watch List. Cash flow has exceeded net income in each of the last three years, and grown at a similar (if modest) rate. Free cash flow, defined as cash from operations less capex, last year was $800 million. Coincidentally, that is also about the same amount as both the cash on hand and the total long-term debt.

Given a total enterprise value of $12.6 billion, the company is trading at a 16x multiple of free cash flow. While not cheap, it implies a growth rate on the order of 4% per year, which is in line with free cash flow and earnings growth last year and well below the average analyst estimate of five-year growth, whatever that is worth.

TJX 1-yr chart
TJX