Toll Brothers Hikes Dividend By 9%: A Move To Boost Investor Value

Toll Brothers, Inc. TOL, a premier luxury homebuilder, has announced a 9% increase in its quarterly dividend, marking the fifth consecutive year of dividend growth. This move underscores the company’s confidence in its financial health and commitment to enhancing shareholder value.

Shares of this Horsham, PA-based homebuilder declined 0.01% during yesterday’s trading session but gained 0.2% during the after-hours trading session.

The company boosted its quarterly dividend to 25 cents per share ($1.00 annually) from 23 cents (92 cents annually). The dividend will be paid on April 25, 2025, to its stockholders of record as of April 11. For investors, the increased payout translates to a forward annualized dividend yield of approximately 0.94% at the current stock price.

This hike reflects its confidence in the stability of the base business, long-term prospects and solid financial position. A dividend increase not only enhances shareholder returns but also raises a stock’s market value. Companies often tend to attract new investors and retain the old ones through this strategy.

A Look at TOL’s Fundamentals & Rationale Behind Consistent Dividend

Toll Brothers has consistently demonstrated a pattern of escalating dividend distributions, marking increases over the past four fiscal years. This upward trajectory can be attributed to its robust financial position, ample liquidity, strong backlog and improved macro backdrop, all of which serve as key drivers for the dividend elevation.

At the end of the first quarter of fiscal 2025, Toll Brothers had more than $2.3 billion of total liquidity, comprising $574.8 million in cash and cash equivalents and $1.77 billion available under the revolver capacity. Also, total debt at the fiscal first-quarter end was $2.75 billion, down from $2.83 billion at fiscal 2024-end. Debt to capital was 26%, down from 27% at fiscal 2024-end.

Despite challenges related to mortgage rate volatility, affordability issues and pressure on profit margins, Toll Brothers continues to attract high-net-worth buyers. The company signed 2,307 net contracts worth $2.3 billion, a 13% increase in units and 12% in value. Contracts per community rose 2% year over year. The deposit conversion ratio reached 82%, exceeding the five-year average of 70%.

The company believes that its strategies of increasing spec production, widening its geographic footprint, price points and product lines, and focusing on operational and capital efficiency are boding well for its prospects. For fiscal 2025, home deliveries are anticipated to be in the range of 11,200-11,600 units, indicating growth from the fiscal 2024 level of 10,813. The strong outlook showcases the long-term fundamentals that continue to support the market for new homes for Toll Brothers.

TOL Stock Price Performance

Image Source: Zacks Investment Research

Shares of Toll Brothers have fallen 15.2% year to date (YTD), underperforming the Zacks Building Products - Home Builders industry’s 6.7% decline. Affordability challenges, lingering inflationary pressures and a still high mortgage rate scenario are concerns.

Toll Brothers remains a fundamentally strong company with solid long-term prospects. The stock’s decline and near-term headwinds have weighed on investor sentiment. However, Toll Brothers continues to attract high-net-worth buyers, maintain stable pricing and strategically manage inventory to navigate market fluctuations.

Toll Brothers’ Zacks Rank & Key Picks

TOL currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Construction sector are as follows:

Sterling Infrastructure, Inc. STRL currently sports a Zacks Rank of 1 (Strong Buy). STRL delivered a trailing four-quarter earnings surprise of 16.2%, on average. The stock has declined 31.3% YTD. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for STRL’s 2025 sales indicates a decrease of 4.1% and an increase of 20.5% for earnings per share (EPS), respectively, from a year ago.

Gibraltar Industries, Inc. ROCK currently carries a Zacks Rank #2 (Buy). ROCK delivered a trailing four-quarter earnings surprise of 1.8%, on average. The stock has risen 11.8% YTD.

The Zacks Consensus Estimate for ROCK’s 2025 sales and EPS calls for an increase of 9.8% and 15.5%, respectively, from a year ago.

Hillman Solutions Corp. HLMN currently carries a Zacks Rank #2. HLMN delivered a trailing four-quarter earnings surprise of 7.6%, on average. The stock has lost 3.8% YTD.

The Zacks Consensus Estimate for HLMN’s 2025 sales and EPS calls for an increase of 4% and 18.4%, respectively, from a year ago.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research