Dividend-Hungry Investors Can Look to These 2 Names as Economy Re-Opens

Despite missing April-quarter results on both its top and bottom lines as its business felt the crunch of the pandemic on consumer spending, shares of TJX Companies moved higher on the company's comments that, based on current government guidance, it could be mostly reopened by the end of June. While some investors were elated by that, also contained inside the TJX April 2020 quarterly earnings release was an announcement from the company that I suspect won't sit well with dividend seeking investors: Decided not to declare a dividend for the first quarter of Fiscal 2021, and at this time, does not expect to declare a dividend in the second quarter of Fiscal 2021. The Company is committed to resuming dividend payments for the long term, as it has done for decades, whenever the environment and its business stabilize. The wildcard in this is that TJX, like many other companies over the last several weeks of quarterly earnings, withdrew its 2020 outlook and guidance. While some may speculate the company could reinstate its dividend in during the September quarter, a safer bet is seeing that reinstatement in the seasonally strong December quarter, provided consumers are willing to open their wallets and make up for the dismal March and April retail sales, as well as what will more than likely be another down month in May. Where can dividend-hungry investors that want to capitalize on the re-opening of the economy look? I have two suggestions to share on that front -- Cintas Corp. and McDonald's . McDonald's Let's start with McDonald's, which has continued to operate during the pandemic through its drive-thru and mobile ordering partners. Despite the pandemic, 75% of all McDonald's restaurants were open at the end of April, including 99% of those in the US. In recent weeks, the company has issued guidelines for its restaurants as they start to re-open for dine-in service. Seating will be limited for social distancing, self service areas will be closed, including fountain soda, and the frequency of cleaning will be far greater. The company has also started to re-open locations in the UK and has restarted take-out service in a fraction of its Canadian locations, before reopening all 14,000 restaurants in Canada. In the coming weeks, as both Europe and the U.S. march through phased re-openings, I would suspect the company's comp sales steadily improve from the double-digit declines registered in March, and that were likely in the first half of the current quarter. The thing is, McDonald's not only has the operational capabilities to survive the pandemic, it has the management and the balance sheet to come out of the pandemic on stronger footing. Even so, management shared that it would cut its capital spending by roughly $1 billion from its previously forecasted $2.4 billion -- and that it would continue to prioritize dividends to shareholders. Cintas Corp. Turing to Cintas Corp., which arguably is not a household name, but like McDonald's the company is a S&P 500 Dividend Aristocrat. What I like about the company's business is the recurring nature of its Uniform Rental and Facility Services business. The former should benefit from the pick-up in the economy, while the latter -- which includes restroom cleaning services and supplies, carpet and tile cleaning services -- should see favorable demand as businesses step up their cleaning as part of their re-opening. And while the company's business is expected to be impacted by the pandemic when it reports its May quarter end, consensus expectations still call for it to deliver EPS near $1.20 and a rebound to $3.30-$3.40 in the second half of 2020. For full year 2020, those estimates have Cintas delivering EPS between $6.50-$6.75 and $844 million in operating cash flow, which more than covers its dividend payments for 2020 and 2021. (TJX is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells this stock? Learn more now.)

Dividend-Hungry Investors Can Look to These 2 Names as Economy Re-Opens

Dividend Aristocrats McDonald's and Cintas Corp. will continue to offer a solid payout as life reaches a new normal.

Columnist Conversation

Tuesday Morning Fibocall for 1/18/2022

This Weekend on Real Money

The S&P Futures, QQQ and DIA

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.