Toromont Industries (TSE:TIH) Will Pay A Larger Dividend Than Last Year At CA$0.35

Toromont Industries Ltd. (TSE:TIH) will increase its dividend on the 5th of July to CA$0.35. Even though the dividend went up, the yield is still quite low at only 1.2%.

Check out our latest analysis for Toromont Industries

Toromont Industries' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Toromont Industries' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 24.8%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Toromont Industries Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2011, the first annual payment was CA$0.64, compared to the most recent full-year payment of CA$1.40. This implies that the company grew its distributions at a yearly rate of about 8.1% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Toromont Industries has been growing its earnings per share at 11% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Toromont Industries' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Toromont Industries that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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