Toro (NYSE:TTC) Is Increasing Its Dividend To $0.38

The Toro Company (NYSE:TTC) has announced that it will be increasing its periodic dividend on the 13th of January to $0.38, which will be 5.6% higher than last year's comparable payment amount of $0.36. Based on this payment, the dividend yield for the company will be 1.8%, which is fairly typical for the industry.

See our latest analysis for Toro

Toro's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Toro was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 7.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Toro Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $0.40 total annually to $1.44. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Toro has seen EPS rising for the last five years, at 8.6% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Toro Looks Like A Great Dividend Stock

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 in all, this checks a lot of the boxes we look for when choosing an income 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. For instance, we've picked out 1 warning sign for Toro that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.