Shop at TJX for "Hidden Yields"

12/05/2019 5:00 am EST

Focus: CONSUMER

Michael Foster

Editor, BNK Invest

Retail has been an increasingly tough place to make a buck in recent years. The big bad Internet has huffed, puffed and blown down many brick and mortar business plans, notes Michael Foster, editor of Hidden Yields.

But some brick buildings are still standing. In fact, their businesses are actually getting stronger and stronger thanks to the smackdown that Amazon is laying on their competitors.

Firms like TJX Companies (TJX) are able to buy their discounted merchandise at even bigger discounts. Being among the last stores standing, they can name their price! Plus the online world still can't compete with the thrill of finding a bargain in person.

The rise of online shopping is actually helping Internet-resistant retailers. As competitors have dropped off, TJX's profit margins have improved by 41% over the last decade.

The growth formula for TJX is pretty simple: add new stores. There are 4,412 worldwide today — including T.J. Maxx and Marshall's — and management believes there's enough room for nearly 40% more.

TJX's profitability may appear modest. However, the firm makes up for it in exceptional volume. Over that 10-year period its dividend has increased by an insane cumulative 667%. Wall Street is finally starting to give TJX shares the respect they deserve.

Management has already been making its move, repurchasing more than one-quarter of the company over the last decade, with 7% of its float removed in the last three years alone. These share buybacks make everything about TJX look better on a "per share" basis, especially the dividend that drives the price.

Plus the company has a potential kicker in e-commerce. Its mobile apps for T.J. Maxx and Marshall's are, shall we say (ahem), a bit "beta" at this point. But building and releasing the app is the hard part, and TJX should be able to improve the mobile experience (and sales volume) from here.

TJX is a dividend raiser that is being thrown out with the entire retail sector. We should grab our stake in the shares before Wall Street fully wakes up to this recession-proof growth story.

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