Toll Brothers, Inc. (NYSE: TOL) has passed our checks, and is about to pay a dividend of US $ 0.17
It looks like Toll Brothers, Inc. (NYSE: TOL) is set to be ex-dividend within the next 4 days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. Thus, you can buy Toll Brothers shares before January 6 in order to receive the dividend that the company will pay on January 21.
The company’s next dividend payment will be US $ 0.17 per share. Last year, in total, the company distributed US $ 0.68 to shareholders. Last year’s total dividend payouts show Toll Brothers to have a 0.9% return on the current share price of $ 72.39. Dividends are a major contributor to returns on investment for long-term holders, but only if the dividend continues to be paid. So we need to determine whether Toll Brothers can afford its dividend and whether the dividend could increase.
Dividends are usually paid out of business income, so if a business pays more than it earned, its dividend is usually at risk of being reduced. Toll Brothers has a low and conservative payout ratio of only 9.2% of its after-tax income. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. The good thing is that dividends were well covered by free cash flow, with the company paying 6.2% of its cash flow last year.
It is positive to see that the Toll Brothers dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher. margin of safety before the dividend is cut.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
NYSE: TOL Historical Dividend January 1, 2022
Have profits and dividends increased?
Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it’s easier to raise the dividend when earnings rise. If business goes into recession and the dividend is reduced, the business could experience a sharp drop in value. It is encouraging to see that Toll Brothers has grown its profits rapidly, increasing by 25% per year for the past five years. Toll Brothers looks like a real growing company, with earnings per share increasing at a breakneck pace and the company is reinvesting most of its profits back into the business.
Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Over the past five years, Toll Brothers has increased its dividend by around 16% per year on average. Both earnings per share and dividends have been rising rapidly lately, which is great to see.
The bottom line
Does Toll Brothers have what it takes to maintain its dividend payments? Toll Brothers has grown its profits at a rapid rate and has a cautiously low payout ratio, which implies that it is reinvesting heavily in its business; a sterling combination. There is a lot to like about Toll Brothers, and we would prioritize taking a closer look.
So while Toll Brothers looks good from a dividend standpoint, it’s still worth being aware of the risks involved in this title. Every business has risks, and we have spotted 1 warning sign for Toll Brothers you should know.
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.
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