Toro's (NYSE:TTC) Upcoming Dividend Will Be Larger Than Last Year's

The board of The Toro Company (NYSE:TTC) has announced that it will be paying its dividend of $0.34 on the 12th of July, an increased payment from last year's comparable dividend. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Toro

Toro's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Toro was paying a whopping 108% as a dividend, but this only made up 26% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 19.0%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Toro Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.22 total annually to $1.36. This means that it has been growing its distributions at 20% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

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 Toro has grown earnings per share at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Toro will make a great income stock. While Toro is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Toro that investors should know about before committing capital to this stock. 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.