Here's What We Like About TMX Group's (TSE:X) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see TMX Group Limited (TSE:X) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. Thus, you can purchase TMX Group's shares before the 13th of November in order to receive the dividend, which the company will pay on the 27th of November.

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. Looking at the last 12 months of distributions, TMX Group has a trailing yield of approximately 1.7% on its current stock price of CA$61.48. If you buy this business for its dividend, you should have an idea of whether TMX Group's dividend is reliable and sustainable. So we need to investigate whether TMX Group can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately TMX Group's payout ratio is modest, at just 45% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. TMX Group has delivered 13% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

From a dividend perspective, should investors buy or avoid TMX Group? Companies like TMX Group that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. TMX Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for TMX Group you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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