Sunday, April 5, 2020

TJX Companies (TJX) Suspends Dividends

It appears that TJX Companies (TJX) suspended their dividend payment. I found this out by accident, after reviewing their recently filed annual report. The annual report was filed on Friday, March 27th. It states the following: (source)

"  In addition, we do not intend to declare a dividend for the first quarter of fiscal 2021. We
continue to evaluate our dividend program in the near term, while we remain committed to paying our dividends whenever the environment normalizes for the long term. We also withdrew our first quarter and full year fiscal 2021 financial guidance given on our February 26, 2020 earnings conference call. The Company is not providing an updated outlook at this time"

It is fascinating that there wasn't a press release outlining that the company is suspending its dividend payments. Most of the resources I track did not list anything for TJX Companies. None of the investors and sites I follow even mentioned that dividend suspension. Perhaps TJX Companies was hoping that noone would notice - after all, few people actually bother to read annual reports these days. It doesn't look good that such a major announcement would simply be buried in an annual report.

The last press release discussing the dividend was from March 19th, where the company discussed canceling its buyback, closing stores around the world, reducing capital expenditures and drawing down on its revolving credit facilities. The press release stated that the company is evaluating its dividend program.  You can read that press release here. Perhaps in this Covid-19 world, when a company mentions that it is evaluating its dividend policy, this is a code word that the dividend will be cut or suspended.

I believe that TJX Companies will likely survive this pandemic, and when this is over, its customers would likely return to its stores. Albeit they will be wearing masks and gloves to sort through all the piles of clothes. 

The most interesting fact for me is that TJX Companies actually raised its dividend on February 26th. The company announced a 13% hike to 26 cents/share, payable in June 2020. This marked the 24th consecutive year that the Company has raised the dividend. (Source)

This just goes to show you that things are moving very quickly, which is why it is difficult to evaluate the fundamentals right now. I do believe the company will survive, and I will take another look when they determine what their dividend policy is. 

Now we may be witnessing the second and third order effects of many of these tenants closing their doors temporarily. The landlords, such as many REITs out there will have to work with tenants on concessions. Some tenants may not be able to survive, so there won't be much left in bankruptcy court. Obviously, many retail and restaurant employees are out of work, and out of a paycheck. They would rely on unemployment insurance, and have a low chance of finding a job in a tough labor market. Their lower spending will hurt their own landlords etc.  Perhaps we will witness a stimulus bill for landlords who work with their tenants. Or perhaps corporate tenants will demand concessions, along with the weak ones. 

We may need a tougher hardstop by wanting more stimulus to help everyone bridge the gap in the economy. When the private sector retreats during a recession, the government needs to step in, to smooth the ride. 

We live in an interesting situation. 

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