Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.
Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Headquartered in Toronto, Toronto-Dominion Bank (TD) is a Finance stock that has seen a price change of 18.76% so far this year. The retail and wholesale bank is currently shelling out a dividend of $0.78 per share, with a dividend yield of 2.78%. This compares to the Banks - Foreign industry's yield of 2.78% and the S&P 500's yield of 1.42%.
Looking at dividend growth, the company's current annualized dividend of $3.11 is up 4.2% from last year. Over the last 5 years, Toronto-Dominion Bank has increased its dividend 3 times on a year-over-year basis for an average annual increase of 5.24%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Toronto-Dominion's current payout ratio is 47%, meaning it paid out 47% of its trailing 12-month EPS as dividend.
Earnings growth looks solid for TD for this fiscal year. The Zacks Consensus Estimate for 2026 is $6.89 per share, which represents a year-over-year growth rate of 15.22%.
From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.
Big, established firms that have more secure profits are often seen as the best dividend options, but it's fairly uncommon to see high-growth businesses or tech start-ups offer their stockholders a dividend. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. With that in mind, TD is a compelling investment opportunity. Not only is it a strong dividend play, but the stock currently sits at a Zacks Rank of #3 (Hold).
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Toronto Dominion Bank (The) (TD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).