IF Bancorp (NASDAQ:IROQ) Is Increasing Its Dividend To $0.20

IF Bancorp, Inc. (NASDAQ:IROQ) will increase its dividend on the 14th of October to $0.20, which is 14% higher than last year's payment from the same period of $0.175. This takes the annual payment to 1.8% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for IF Bancorp

IF Bancorp's Payment Expected To Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive.

IF Bancorp has a good history of paying out dividends, with its current track record at 9 years. While past records don't necessarily translate into future results, the company's payout ratio of 19% also shows that IF Bancorp is able to comfortably pay dividends.

Looking forward, earnings per share could rise by 9.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the future payout ratio could be 21% by next year, which is in a pretty sustainable range.

IF Bancorp Is Still Building Its Track Record

It is great to see that IF Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2013, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.35. This means that it has been growing its distributions at 15% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that IF Bancorp has grown earnings per share at 9.5% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for IF Bancorp's prospects of growing its dividend payments in the future.

We Really Like IF Bancorp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for IF Bancorp that investors should know about before committing capital to this stock. Is IF Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.