Territorial Bancorp's (NASDAQ:TBNK) Shareholders Will Receive A Smaller Dividend Than Last Year

Territorial Bancorp Inc. (NASDAQ:TBNK) has announced that on 24th of November, it will be paying a dividend of$0.05, which a reduction from last year's comparable dividend. However, the dividend yield of 3.7% still remains in a typical range for the industry.

See our latest analysis for Territorial Bancorp

Territorial Bancorp's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Territorial Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While there are no guarantees that Territorial Bancorp will always be able to pay out a dividend, the company's payout ratio sits at 99%. This figure could be worrying with regards to the sustainability of the company's dividends, as earnings just barely cover its dividend payments.

Looking forward, earnings per share is forecast to fall by 3.3% over the next 3 years. For the same time period, analysts estimate that the future payout ratio could be 32% which would at least be quite feasible taking the dividend forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was $0.48, compared to the most recent full-year payment of $0.30. This works out to be a decline of approximately 4.6% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Territorial Bancorp's EPS has declined at around 12% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Territorial Bancorp's Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Territorial Bancorp (1 is potentially serious!) that you should be aware of before investing. Is Territorial Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.