Top Dividend Growth Stocks: #18 The Toro Co.

Toro makes professional and residential turf and landscape equipment, grounds maintenance equipment, golf mowing, specialty construction equipment, snowplows, salt and sand spreaders, provides irrigation and lighting,  trimmers, blowers, Founded in 1914, TTC is headquartered in Bloomington, Minnesota.

The Toro Co (TTC) is Fully Certified, passing ALL Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 36 years, making it a Dividend Aristocrat 25+. We consider TTC to be a Growth stock.

GROWTH:  TTC’s 5-year average dividend growth rate is 14.8%, slightly above the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 11.1% per year for the last 5 years versus the dividend universe at 8.3%, so TTC is doing nicely.

INCOME: TTC’s current dividend yield is 1.03%, less than half of the average at 2.65%. 

SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. TTC has a DCR of 4.7 which is very good, more than double the minimum of 2. 

VALUATION: The price at time of analysis was $98.18, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $68.16. The S&P500’s average PE ratio is 38.42, versus TTC’s PE ratio of 32.25,  below the S&P 500 average PE, indicating some value, as compared to our dividend universe. Our ‘Value Rating’ for The Toro Co is 1.5 out of 5.0, meaning that  both PS and PE indicate the stock is moderately expensive, compared to other dividend stocks available.

TIMING: Historical Yield and PE tell us that TTC has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof). 

QUALITY: Our quality formula gives TTC a ‘Quality Rating’ of 4.7 (out of 5), versus the average of 2.7 for this month’s dividend universe.

Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate The Toro Co a ‘A+.’

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