IF Bancorp (NASDAQ:IROQ) Will Pay A Larger Dividend Than Last Year At US$0.17

IF Bancorp, Inc.'s (NASDAQ:IROQ) dividend will be increasing to US$0.17 on 15th of October. This takes the annual payment to 1.5% 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 Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, IF Bancorp's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 16.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. The first annual payment during the last 8 years was US$0.10 in 2013, and the most recent fiscal year payment was US$0.35. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that IF Bancorp has grown earnings per share at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

IF Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that IF Bancorp is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for IF Bancorp that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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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.
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