Toro Co. (NYSE:TTC): A Strong Dividend Pick with Sustainable Yield and Financial Stability

Dividend investors often look for a mix of yield, sustainability, and financial strength when choosing stocks. A method to find good options is by using a screening process that picks companies with strong dividend scores while also having good profitability and financial stability. The Toro Co. (NYSE:TTC) appears as a possible choice from this screen, which focuses on stocks with a ChartMill Dividend Rating of 7 or higher, along with minimum scores for profitability (Rating ≥5) and financial health (Rating ≥5). This approach helps avoid high-yield stocks with unstable payouts due to weak finances, while highlighting firms that can keep and grow their dividends over time.

Dividend Strength: A Steady Payout

Toro Co. has a Dividend Rating of 7, showing its reliable history and sustainable payout structure. Key points from its fundamental analysis report include:

• Yield and Growth: TTC provides a 2.07% dividend yield, slightly higher than its industry average (1.91%) and close to the broader market (S&P 500 average: 2.40%). While not the highest yield, its 9.97% average yearly dividend growth over the last 10 years shows a focus on increasing shareholder returns.
• Payout Sustainability: The company’s payout ratio of 37.79% is low, meaning it has plenty of room to keep paying dividends even if earnings change. This matches the screen’s goal of avoiding stocks with payout ratios above 80%.
• Track Record: TTC has paid dividends for at least 10 straight years without cuts, a sign of reliability for income-focused investors.

Profitability and Financial Health: Backing the Dividend

A steady dividend depends on a strong business. TTC’s Profitability Rating of 7 and Health Rating of 6 suggest a solid base:

• Profitability Metrics: The company has a 10.53% Return on Assets (top 20% of peers) and a 27.01% Return on Equity (top 8%), showing efficient use of capital. Its operating margin has also grown recently, reaching 11.21%.
• Financial Stability: TTC’s Altman-Z score of 4.34 (better than 70% of industry peers) and reasonable debt levels (Debt/Equity of 0.73) indicate low bankruptcy risk. However, its quick ratio of 0.79 points to a liquidity issue worth watching.

Valuation and Growth Factors

While TTC’s valuation is fair (P/E of 17.56, below the S&P 500’s 26.51), its growth outlook is modest. Analysts expect 4.32% yearly EPS growth and 1.08% revenue growth, which may slow faster dividend increases. This highlights the need to balance yield with growth potential in dividend strategies.

Why These Criteria Are Important

The screening method picks companies like TTC because:

1. High Dividend Ratings confirm yield and growth potential.
2. Profitability shows earnings strength to support payouts.
3. Financial Health lowers the chance of dividend cuts during tough times.

For investors searching for similar options, the Best Dividend Stocks screen provides a list of stocks meeting these standards.

Disclaimer: This analysis is not investment advice. Always do your own research or talk to a financial advisor before making investment choices.