Should You Buy TMX Group Limited (TSE:X) For Its Upcoming Dividend?
TMX Group Limited (TSE:X) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase TMX Group's shares on or after the 14th of August will not receive the dividend, which will be paid on the 28th of August.
The company's next dividend payment will be CA$0.26 per share. Last year, in total, the company distributed CA$1.04 to shareholders. Last year's total dividend payments show that TMX Group has a trailing yield of 2.0% on the current share price of CA$52.14. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately TMX Group's payout ratio is modest, at just 42% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
View our latest analysis for TMX Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, TMX Group's earnings per share have been growing at 17% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, TMX Group has increased its dividend at approximately 13% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
From a dividend perspective, should investors buy or avoid TMX Group? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, TMX Group looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Ever wonder what the future holds for TMX Group? See what the six analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.