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Is It Worth Considering The Toronto-Dominion Bank (TSE:TD) For Its Upcoming Dividend?

Simply Wall St
·3 mins read

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that The Toronto-Dominion Bank (TSE:TD) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 8th of October, you won't be eligible to receive this dividend, when it is paid on the 31st of October.

Toronto-Dominion Bank's next dividend payment will be CA$0.79 per share. Last year, in total, the company distributed CA$3.16 to shareholders. Calculating the last year's worth of payments shows that Toronto-Dominion Bank has a trailing yield of 5.1% on the current share price of CA$62.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Toronto-Dominion Bank can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Toronto-Dominion Bank

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Toronto-Dominion Bank paid out 59% of its earnings to investors last year, a normal payout level for most businesses.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Toronto-Dominion Bank earnings per share are up 4.5% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Toronto-Dominion Bank has increased its dividend at approximately 10.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Toronto-Dominion Bank? Toronto-Dominion Bank has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We think there are likely better opportunities out there.

Ever wonder what the future holds for Toronto-Dominion Bank? See what the 10 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top 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@simplywallst.com.