Toronto-Dominion Bank (TSE:TD) Is Increasing Its Dividend To CA$0.96

The board of The Toronto-Dominion Bank (TSE:TD) has announced that it will be paying its dividend of CA$0.96 on the 30th of April, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 4.3%.

Check out our latest analysis for Toronto-Dominion Bank

Toronto-Dominion Bank's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Toronto-Dominion Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 44%, which means that Toronto-Dominion Bank would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 2.5% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 43% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was CA$1.44, compared to the most recent full-year payment of CA$3.84. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Toronto-Dominion Bank Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Toronto-Dominion Bank has been growing its earnings per share at 8.6% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Toronto-Dominion Bank's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Toronto-Dominion Bank that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.