What could be better than a big sale at your favorite retail store? That's right -- a meaty dividend raise from one of your favorite retail stocks. In recent weeks, not one but two powerful companies in the sector upped their quarterly payouts: Costco Wholesale (NASDAQ: COST) and TJX Companies (NYSE: TJX). What's more, both lifted their dividends by double-digit percentages.
Here's what this could all mean for investors.
1. Costco
Several days after reporting its fiscal 2025 second-quarter results, Costco pulled the lever on its typical, once-per-year regular dividend raise. It lifted its quarterly disbursement by 12% to $1.30 per share, amounting to an annual figure of $5.20.
Will this help the stock regain popularity, though? Investors bid it down after the company took the wraps off its fiscal second-quarter numbers in early March. The results weren't necessarily discouraging, but investors' moods were dampened by management's warnings about the effect that President Donald Trump's tariffs would have on the retail sector in general, and Costco's own business specifically.
This is a genuine concern for Costco, as management noted around one-third of its sales come from imported goods. Compounding that, a significant portion of those come from countries that Trump has expressly targeted in his trade war, like China, Canada, and Mexico.
The company's shares have only recovered about half of the value they lost in that March slump, but I think they deserve a reappraisal. Firstly, it seems as if management is not only doing something about this, but doing so assertively. A March 16 article in the Financial Times, citing several suppliers it did not name, said that Costco officials were putting pressure on Chinese suppliers to cut their prices to help blunt the effect of Trump's import taxes.
Also, given that Trump has made some concessions to various U.S. companies and interests (such as exempting smartphones from the tariffs), it's very possible this trade conflict could lessen in the very near future. It has at least cooled substantially in a short period of time, and I wouldn't be surprised to see more concessions before long. This makes the still-beaten-down Costco stock a bargain to me.
The stock's dividend raise will take effect with the payout that's scheduled for May 16; investors of record as of May 2 will be eligible to receive it. At the company's current share price, it would yield 0.5%.
2. TJX
Elsewhere in the retail world, TJ Maxx and Marshalls owner TJX is also preparing to hand out an enhanced payout. On June 5, it'll distribute a dividend of $0.425 per share, which is a 13% improvement over what it paid three months prior. Similar to Costco, TJX is a habitual dividend raiser -- this will be its 28th upward adjustment in the past 29 years.
On top of that, TJX likes to support its stock price by spending billions of dollars annually on repurchasing shares. In the same press release, the company said it aims to spend $2 billion to $2.5 billion in its current fiscal year (2026) on share buybacks. That's more or less in line with its typical annual outlay.
TJX has the financial flexibility to cover both dividend hikes and stock buybacks because it's a relatively profitable and high-margin operation for the retail sector, where thin net margins are the rule rather than the exception. Smart inventory management and flexible buying strategies by a nimble management team are key reasons.
Meanwhile, its growth in core fundamentals in fiscal 2025 came from both new store openings and a 4% rise in same-store sales.
Unlike the single-brand Costco, TJX operates several different chains. Besides TJ Maxx and Marshalls (which serve roughly similar niches), in the U.S., it has the HomeGoods and HomeSense home furnishing chains, as well as Sierra, which focuses on outdoor recreation gear and activewear. In its fiscal 2025 (which ended Feb. 1), it increased the store counts for all five chains, indicating confidence not only in its strategy, but the viability of each brand.
This is a well-run business that continues to do well, and investors can expect additional generous payout hikes in the coming years. TJX's freshly raised dividend is to be handed out on June 5 to shareholders of record as of May 15. The new distribution would yield 1.3% at the stock's most recent closing price.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and TJX Companies. The Motley Fool has a disclosure policy.
