This Canadian industrial firm is a leader in its niche market. Its strong reputation should help it win new customers and contracts to boost its backlog as the economy recovers from the COVID-19 pandemic.
In the meantime, it has increased its shareholder dividend for 31 years running.
TOROMONT INDUSTRIES LTD. (Toronto symbol TIH; www.toromont.com) distributes a range of industrial equipment, including Caterpillar machinery, in eastern Canada. It also makes refrigeration systems through its CIMCO business.
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The COVID-19 shutdowns slowed mining and construction activity in the three months ended June 30, 2020. That’s why revenue in the quarter fell 13.2%, to $849.6 million from $978.3 million a year earlier. Earnings also dropped, falling 34.7% to $0.62 a share from $0.95. The decline was partly due to higher provisions for loans to customers who may struggle to pay their bills. However, demand for Toromont’s products should rebound as the economy re-opens.
The company’s backlog declined by 10.0%, to $496.5 million from a year earlier. Higher orders at Cimco offset lower demand at the equipment group.
Growth Stocks: Latest 14.8% increase adds to investor appeal
With the April 2020 payment, Toromont raised its quarterly dividend by 14.8%. Investors now receive $0.31 a share, up from $0.27. The new annual rate of $1.24 yields 1.6%. The company has increased its dividend for 31 consecutive years.
What’s more, the dividend has now grown an average of 12.8% annually over the last 5 years. The company’s TSI Dividend Sustainability Rating is Above Average.
Recommendation in Dividend Advisor: Toromont Industries Ltd. is a buy.
Comments
W H
I am unable to understand how a company could increase its dividend for 31 years and for the past five years increase their dividend by 13% annual with a result its dividend rate is now all the way up to 1.6%. Further if Enbridge offers over 6% dividend, why would one invest in a company providing 1.6%..Confusing to an amateur!
Thanks for your question. If a profitable company—such as the Successful Investor recommendation you mention, Toromont—pays out a relatively low percentage of its profits as dividends it generally means they are retaining funds to reinvest for growth. That means that even though you’re perhaps getting a lower dividend yield, you are also getting enhanced capital growth prospects and a higher eventual share price.
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I am unable to understand how a company could increase its dividend for 31 years and for the past five years increase their dividend by 13% annual with a result its dividend rate is now all the way up to 1.6%. Further if Enbridge offers over 6% dividend, why would one invest in a company providing 1.6%..Confusing to an amateur!
Thanks for your question. If a profitable company—such as the Successful Investor recommendation you mention, Toromont—pays out a relatively low percentage of its profits as dividends it generally means they are retaining funds to reinvest for growth. That means that even though you’re perhaps getting a lower dividend yield, you are also getting enhanced capital growth prospects and a higher eventual share price.