It looks like The Toro Company (NYSE: TTC) is set to be ex-dividend within the next 3 days. The ex-dividend date is generally set at one working day before the registration date which is the deadline by which you must be present in the books of the company as a shareholder to receive the dividend. It is important to know the ex-dividend date because any transaction in the share must have been settled by the registration date at the latest. Therefore, if you buy Toro shares on or after October 5, you will not be able to receive the dividend when it is paid on October 21.
The company’s next dividend payment will be US $ 0.26 per share, compared to last year when the company paid a total of US $ 1.05 to shareholders. Last year’s total dividend payouts show Toro has a rolling 1.1% return on the current stock price of $ 97.41. If you are buying this company for its dividend, you should know if Toro’s dividend is reliable and sustainable. You have to see if the dividend is covered by profits and if it increases.
If a company pays more dividends than it has earned, then the dividend could become unsustainable – which is not an ideal situation. Fortunately, Toro’s payout ratio is modest, at just 26% of profits. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. It paid 18% of its free cash flow in dividends last year, which is cautiously low.
It is positive to see that Toro’s dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a larger margin of. security before the dividend is cut.
NYSE: TTC Historical Dividend October 1, 2021
Have profits and dividends increased?
Companies with consistently increasing earnings per share usually make the best dividend-paying stocks because they generally find it easier to increase dividends per share. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. For this reason, we are pleased to see that Toro’s earnings per share have grown 17% per year over the past five years. Earnings per share are growing rapidly and the company keeps more than half of its profits in the business; an attractive combination that could suggest the company is focusing on reinvestment to further increase profits. Fast-growing companies that reinvest heavily are attractive from a dividend standpoint, especially since they can often increase the payout ratio later.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, Toro has increased its dividend by approximately 18% per year on average. It is exciting to see that earnings and dividends per share have grown rapidly over the past few years.
Is Toro Worth Buying For Its Dividend? We like the fact that Toro is increasing its earnings per share while simultaneously paying a small percentage of its earnings and cash flow. These characteristics suggest that the company is reinvesting in growing its business, while the prudent payout ratio also implies a reduced risk of dividend reduction in the future. It is a promising combination that should mark this company worthy of further attention.
On that note, you’ll want to research the risks Toro faces. In terms of investment risks, we have identified 1 warning sign with Toro and understanding them should be part of your investment process.
A common investment mistake is to buy the first interesting stock you see. Here you can find a list of promising dividend-paying stocks with a yield above 2% and a future dividend.
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