Territorial Bancorp (NASDAQ:TBNK) Will Pay A Dividend Of US$0.23

The board of Territorial Bancorp Inc. (NASDAQ:TBNK) has announced that it will pay a dividend of US$0.23 per share on the 24th of November. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Territorial Bancorp

Territorial Bancorp's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Territorial Bancorp was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 14.5% over the next 12 months. 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was US$0.28 in 2011, and the most recent fiscal year payment was US$0.92. This means that it has been growing its distributions at 13% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

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. Earnings has been rising at 3.9% per annum over the last five years, which admittedly is a bit slow. Growth of 3.9% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Territorial Bancorp you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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