Attention dividend hunters! The Toronto-Dominion Bank (TSE:TD) will be distributing its dividend of CA$0.67 per share on the 31 January 2019, and will start trading ex-dividend in 4 days time on the 09 January 2019. Should you diversify into Toronto-Dominion Bank and boost your portfolio income stream? Well, keep on reading because today, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
Check out our latest analysis for Toronto-Dominion Bank
5 checks you should do on a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Toronto-Dominion Bank fit our criteria?
The company currently pays out 43% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 41% which, assuming the share price stays the same, leads to a dividend yield of 4.4%. Furthermore, EPS should increase to CA$6.67.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. In the case of TD it has increased its DPS from CA$1.22 to CA$2.68 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Relative to peers, Toronto-Dominion Bank has a yield of 4.0%, which is on the low-side for Banks stocks.
Next Steps:
Considering the dividend attributes we analyzed above, Toronto-Dominion Bank is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for TD’s future growth? Take a look at our free research report of analyst consensus for TD’s outlook.
- Valuation: What is TD worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether TD is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.