TMX Group's (TSE:X) Dividend Will Be Increased To CA$0.22

The board of TMX Group Limited (TSE:X) has announced that it will be paying its dividend of CA$0.22 on the 29th of August, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.6%.

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TMX Group's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, TMX Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 31.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for TMX Group

TMX Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.32 in 2015 to the most recent total annual payment of CA$0.88. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that TMX Group has grown earnings per share at 12% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like TMX Group's Dividend

Overall, a dividend increase is always good, and we think that TMX Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for TMX Group for free with public analyst estimates for the company. 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.