Find Out What's in Store for These Dividend Contenders

Let's look at several Dividend Contenders in the retail business from the lens of the June sales report that came in ahead of expectations, giving a positive bump to second quarter GDP results, which also slightly beat expectations. While many fixated on how retail sales fared in the month of June, the report also gives us insight into how the various categories tabulated by the Census Bureau performed during the first half of the year. Key to that presentation was the comparison between the first and second quarters, as well as my preferred year-over-year comparisons. So what did we learn? Overall, June Retail Sales accelerated during the second quarter, rising 3.2% year-over-year and 1.7%, compared with the previous quarter. Digital shopping was the fastest growing category during the June quarter, up 11.9% year-over-year, and it too saw a pronounced pick up from the 3.5% year-over-year increase recorded during the March quarter. Digital shopping also accounted for roughly 13.5% of overall retail sales during the first half of 2019. If you're thinking the run rate level is higher exiting the June quarter, not only would I agree, but I would say we also have to factor in Prime Day, which will surely goose those numbers, mostly thanks to Amazon , but also to all the other retailers who tried to cash in on Prime Day momentum. (Prime Day's two-day sales surpassed the previous Black Friday and Cyber Monday combined, said the company.) Retail sales at department stores, such as JC Penney and the like, continued to come under pressure during the June quarter and those sales slumped both on a year-over-year and quarter-over-quarter basis. I chalk that up to two factors, the first of which I touched on above -- the increasing shift to digital commerce. The other headwind department stores face is a consumer base that is increasingly weighed down by debt. It's no secret that consumer debt levels have been rising, but a new report based on data collected by the Federal Deposit Insurance Corporation and published by MagnifyMoney showed that credit card interest is choking consumers. Americans, according to the report, paid banks $113 billion in credit card interest in 2018, up 12% from the $101 billion in interest paid in 2017, and up 49% over the last five years. And as we've seen in the monthly Consumer Credit Report issued by the Federal Reserve, revolving consumer credit, which includes credit card balances, has only grown year to date. In other words, consumers are using credit card debt to fund their spending and rising interest payments will squeeze disposable income levels. To me this argues very well for and helps explain why companies like Costco Wholesale , TJX Companies and Ross Stores -- which help shoppers stretch their disposable spending dollars -- have done as well as they have this year. It so happens that both TJX Companies and Ross Stores are also Dividend Contenders. And after 24 years of consecutive dividend increases, Ross Stores is on the verge of qualifying to graduate to the Dividend Aristocrats group. TJX also has an impressive track record when it comes to dividend increases, but it still has a few years to go until its eligible for Aristocrat consideration. Do ROST shares boast a compelling dividend yield? The firm answer to that at 0.9% is a resounding no. But as we can see in the below share price chart, we can clearly see the step function higher in stock price that goes along with those 24 years of consecutive dividend increases. So far this year, Ross has paid two quarterly dividends each at 25.5 cents per share, which is more than 13% higher year-over-year. While we're still several months away from the company announcing its next dividend increase, over the last five years, the annual dividend increase has been in the range of 13%-21%. Even if we see Ross Stores up its 2020 dividend payment by a somewhat smaller amount, call it 10%, it more than breaks through the 25-year barriers with a likely next stop being the S&P 500 Dividend Aristocrats Index. Amazon is a holding in Jim Cramer's Action Alerts PLUS member club.

Find Out What's in Store for These Dividend Contenders

Analyzing the June sales report shows how companies like TJX and Ross Stores are in-line to potentially become Dividend Aristocrats.

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