Territorial Bancorp (NASDAQ:TBNK) Has Announced A Dividend Of US$0.23

Territorial Bancorp Inc. (NASDAQ:TBNK) has announced that it will pay a dividend of US$0.23 per share on the 24th of February. This means the dividend yield will be fairly typical at 4.1%.

See our latest analysis for Territorial Bancorp

Territorial Bancorp's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Territorial Bancorp's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 8.0%. If the dividend continues along recent trends, we estimate the payout ratio could be 61%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from US$0.28 in 2012 to the most recent annual payment of US$1.02. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Territorial Bancorp's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Territorial Bancorp is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Territorial Bancorp's Dividend

Overall, a consistent dividend is a good thing, and we think that Territorial Bancorp has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Territorial Bancorp you should be aware of, and 1 of them is a bit unpleasant. We have also put together a list of global stocks with a solid dividend.

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