Ross Stores: A Dividend Machine Built to Weather Any Storm

The off-price retail sector has long been a bastion of resilience, and Ross Stores (NASDAQ: ROST) stands as its most consistent dividend-paying titan. With a dividend growth rate of 14.01% over the past decade and a payout ratio consistently below 25%, Ross has transformed itself into a cash-generating powerhouse. Here’s why investors should consider this stock—and its dividend—as a core holding for years to come.

The Dividend Track Record: Steady as a Rock

Ross Stores’ dividend history is a masterclass in consistency. Since 2013, the company has increased its quarterly payout every year, with notable jumps like a +40.6% surge in 2018 and a 10% boost in early 2025, raising the dividend to $0.405 per share. Over the past five years, dividend growth averaged 7.41% annually, while the 10-year CAGR (Compound Annual Growth Rate) of 14.01% outpaces most peers.

What makes this growth sustainable? The answer lies in Ross’s financial discipline. Its payout ratio—a measure of earnings spent on dividends—has never exceeded 25% in the past decade. With fiscal 2024 earnings of $6.32 per share, the current $1.62 annual dividend (as of March 2025) consumes just 25.6% of profits. That leaves ample room to grow dividends further without straining cash flows.

Financial Fortitude: Cash, Cash, and More Cash

Ross Stores’ balance sheet is a fortress. As of February 2025, it held $4.7 billion in cash—a staggering 23% of its market cap—and had no long-term debt. This liquidity isn’t just a safety net; it’s a weapon. The company spent $1.05 billion on share buybacks in 2024 and plans to deploy the remaining $1.05 billion of its $2.1 billion repurchase program this year.

Combined with its dividend, Ross returned $2.1 billion to shareholders in 2024 alone. Yet this generosity is underpinned by robust earnings. Despite a 3% to flat comparable sales guidance for early 2025 due to macroeconomic headwinds, Ross’s earnings remain resilient. Even in a weaker sales environment, its 4.4x dividend coverage ratio (earnings per share divided by dividend per share) ensures the dividend is secure.

Why Off-Price Retailing Is a Safe Haven

The off-price model thrives in both boom and bust. During expansions, Ross capitalizes on excess inventory from competitors. In downturns, its discounted prices attract budget-conscious shoppers. This dual advantage has made Ross a $150 billion behemoth, with over 2,000 stores nationwide.

Critics might argue that rising interest rates or inflation could hurt discretionary spending. But Ross’s data tells a different story. Even in 2023, when inflation peaked, Ross’s sales grew 4%, driven by its ability to source deeply discounted brands. Its average ticket price—$39.50—remains a fraction of full-price retailers, making it a go-to for price-sensitive consumers.

The Case for Immediate Action: Buy Now, Grow Later

At a 0.98% dividend yield, Ross may not excite income investors chasing 5%-plus payouts. But this is a company built for total return, not just dividends. Consider this:

• Dividend Upside: With a payout ratio of 25.6%, Ross could raise its dividend by 20% over the next three years without stressing its finances.
• Share Buybacks: The $1.05 billion repurchase program could reduce its share count by 1%, boosting per-share earnings.
• Stock Performance: Over the past decade, ROST has delivered a 220% total return, outperforming the S&P 500’s 140% gain.

The stock trades at 24.4x forward earnings, a premium to its five-year average of 22.5x. But given Ross’s earnings stability and dividend predictability, this premium is justified.

The Bottom Line

Ross Stores isn’t just a dividend stalwart—it’s a total return engine in a sector primed to outperform. With a fortress balance sheet, a track record of weathering economic cycles, and a dividend that grows while others stagnate, this is a stock to own for decades.

The question isn’t whether to buy Ross Stores. It’s: Why haven’t you already?