Territorial Bancorp (NASDAQ:TBNK) Will Pay A Dividend Of $0.10

Territorial Bancorp Inc. (NASDAQ:TBNK) will pay a dividend of $0.10 on the 29th of December. Including this payment, the dividend yield on the stock will be 4.0%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Territorial Bancorp

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

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable.

Having distributed dividends for at least 10 years, Territorial Bancorp has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Territorial Bancorp's payout ratio of 49% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 22.7% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 66% over the same time period, which we think the company can easily maintain.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.92. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Territorial Bancorp hasn't seen much change in its earnings per share over the last five years. Growth of 0.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

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 payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 shouldn't be ignored. Is Territorial Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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