Timberland Bancorp (NASDAQ:TSBK) Is Increasing Its Dividend To $0.23

Timberland Bancorp, Inc. (NASDAQ:TSBK) will increase its dividend from last year's comparable payment on the 24th of February to $0.23. This takes the annual payment to 2.8% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Timberland Bancorp

Timberland Bancorp's Earnings Will Easily Cover The Distributions

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, Timberland Bancorp has a long history of paying out a part of its earnings to shareholders. Based on Timberland Bancorp's last earnings report, the payout ratio is at a decent 28%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS could expand by 9.0% if recent trends continue. If the dividend continues on this path, the future payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Timberland Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.12 in 2013, and the most recent fiscal year payment was $0.92. This means that it has been growing its distributions at 23% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Timberland Bancorp Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Timberland Bancorp has seen EPS rising for the last five years, at 9.0% per annum. Timberland Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Timberland Bancorp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Timberland Bancorp that investors need to be conscious of moving forward. Is Timberland Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.