There is a lot to be liked about The Toronto-Dominion Bank (TSE:TD) as an income stock. It has paid dividends over the past 10 years. The company currently pays out a dividend yield of 3.7% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at Toronto-Dominion Bank in more detail.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- 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 have the ability to keep paying its dividends going forward?
How well does Toronto-Dominion Bank fit our criteria?
The current trailing twelve-month payout ratio for the stock is 43%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 43%, leading to a dividend yield of 3.9%. Moreover, EPS should increase to CA$6.52.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. 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. This is an impressive feat, which makes TD a true dividend rockstar.
Compared to its peers, Toronto-Dominion Bank generates a yield of 3.7%, which is on the low-side for Banks stocks.
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 urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three essential aspects you should further examine:
- 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 email@example.com.