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Tootsie Roll Industries, Inc. (NYSE:TR) Looks Interesting, And It's About To Pay A Dividend

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Simply Wall St
·4 min read
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Tootsie Roll Industries, Inc. (NYSE:TR) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 4th of March will not receive this dividend, which will be paid on the 26th of March.

Tootsie Roll Industries's next dividend payment will be US$0.18 per share, and in the last 12 months, the company paid a total of US$0.36 per share. Looking at the last 12 months of distributions, Tootsie Roll Industries has a trailing yield of approximately 1.2% on its current stock price of $30.81. If you buy this business for its dividend, you should have an idea of whether Tootsie Roll Industries's dividend is reliable and sustainable. So we need to investigate whether Tootsie Roll Industries can afford its dividend, and if the dividend could grow.

See our latest analysis for Tootsie Roll Industries

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Tootsie Roll Industries paid out a comfortable 40% of its profit last year. A useful secondary check can be to evaluate whether Tootsie Roll Industries generated enough free cash flow to afford its dividend. Fortunately, it paid out only 34% of its free cash flow in the past year.

It's positive to see that Tootsie Roll Industries's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Tootsie Roll Industries paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Tootsie Roll Industries's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Tootsie Roll Industries has lifted its dividend by approximately 4.5% a year on average.

Final Takeaway

Is Tootsie Roll Industries worth buying for its dividend? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Tootsie Roll Industries is halfway there. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Tootsie Roll Industries has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Tootsie Roll Industries that we strongly recommend you have a look at before investing in the company.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.