Territorial Bancorp (NASDAQ:TBNK) Is Paying Out A Dividend Of $0.23

The board of Territorial Bancorp Inc. (NASDAQ:TBNK) has announced that it will pay a dividend of $0.23 per share on the 25th of August. Based on this payment, the dividend yield will be 4.5%, which is fairly typical for the industry.

See our latest analysis for Territorial Bancorp

Territorial Bancorp's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Territorial Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Territorial Bancorp's payout ratio of 48% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 9.6% over the next year. But if the dividend continues along recent trends, we estimate the future payout ratio could be 62%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $0.36 in 2012 to the most recent total annual payment of $1.02. This means that it has been growing its distributions at 11% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Territorial Bancorp hasn't seen much change in its earnings per share over the last five years. The company has been growing at a pretty soft 0.6% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, a consistent dividend is a good thing, and we think that Territorial Bancorp has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Territorial Bancorp (1 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.