The retail sector has been tough to invest in over the past year, as many retailers struggled to attract brick-and-mortar visitors in the age of Amazon (NASDAQ:AMZN). But amid the carnage, income investors can still find some reliable dividend plays. Today we’ll take a look at three stocks that fit the bill — Wal-Mart (NYSE:WMT), TJX Companies (NYSE:TJX), and American Eagle Outfitters (NYSE:AEO).


Wal-Mart is arguably the only big box retailer that can directly counter Amazon. Wal-Mart is turning its thousands of stores into fulfillment centers for online orders, and it offers curbside pickup for customers who don’t want to wait for their orders. It’s matching Amazon’s prices and shipping fees, expanding its digital ecosystem with more efficient apps and payment systems, and countering big events like Prime Day with its own online sales.

The interior of a Wal-Mart store.
Source: Wal-Mart.

It’ll be a bruising battle, but I believe Wal-Mart has the scale to hold its ground. Wal-Mart’s comps rose 1.4% in the U.S. last quarter, its e-commerce revenue surged 63%, and it posted its first quarter of annual earnings growth in over two years. Analysts expect its revenue and earnings to respectively rise 2% and 1% this year.

Wal-Mart pays a forward dividend yield of 2.7%, and it’s raised that payout annually for over four decades. It spent just 46% of its earnings and 30% of its free cash flow on those payments over the past 12 months, so it has plenty of room for future hikes. The stock also trades at a reasonable 17 times earnings, which matches the industry average for discount stores.

TJX Companies

As Amazon crushes major retailers, much of their excess inventory gets sold at steep discounts to TJX Companies, the parent company of off-price retailers T.J. Maxx, Marshalls, and HomeGoods. It does this via a network of over 1,000 merchandise buyers, which have relationships with over 18,000 vendors. This scale makes it the go-to company for dumping excess inventory, and helps it negotiate cheaper prices from smaller retailers.

That’s why TJX’s stores dominate the off-price niche with its treasure troves of brand-name products being sold at discount prices. TJX’s comps rose 1%…