Why you might be interested in the Toronto-Dominion Bank (TSE: TD) for its upcoming dividend
The Toronto-Dominion Bank The stock (TSE: TD) is about to trade off-dividend in four days. The ex-dividend date is one working day before the registration date, which is the deadline by which shareholders must be present on the books of the company to be eligible for the payment of a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not appear on the books of the company on the date of registration. For example, you can buy Toronto-Dominion Bank shares before October 7 in order to receive the dividend that the company will pay on October 31.
The company’s next dividend payment will be C $ 0.79 per share, compared to last year when the company paid a total of C $ 3.16 to shareholders. Last year’s total dividend payments show the Toronto-Dominion Bank to have a 3.7% return on the current price of C $ 85.37. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. That is why we should always check whether dividend payments seem sustainable and whether the business is growing.
Check out our latest analysis for the Toronto-Dominion Bank
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. The Toronto-Dominion Bank paid a comfortable 37% of its profits last year.
When a company has paid less dividends than it made a profit, it usually suggests that its dividend is affordable. The lower the% of its profit that it pays out, the greater the margin of safety for the dividend if the company goes into recession.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If business goes into recession and the dividend is reduced, the company could experience a sharp drop in value. Fortunately for readers, the Toronto-Dominion Bank’s earnings per share have grown 15% per year over the past five years.
Another key way to measure a company’s dividend outlook is to measure its historical rate of dividend growth. The Toronto-Dominion Bank paid an average annual increase of 10.0% in its dividend, based on dividend payments over the past 10 years. It is encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.
From a dividend perspective, should investors buy or avoid the Toronto-Dominion Bank? When companies grow rapidly and keep the majority of profits within the company, it is usually a sign that reinvesting profits is creating more value than paying dividends to shareholders. Perhaps even more important – it can sometimes indicate that management is focused on the long-term future of the business. The Toronto-Dominion Bank ticks a lot of boxes for us from a dividend perspective, and we believe these characteristics should mark the company as deserving more attention.
With this in mind, an essential part of in-depth stock research is being aware of the risks stocks currently face. We have identified 3 warning signs with the Toronto-Dominion Bank (at least 1 which is a little worrying), and understanding them should be part of your investment process.
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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