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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Territorial Bancorp Inc. (NASDAQ:TBNK) is about to go ex-dividend in just four days. You will need to purchase shares before the 10th of February to receive the dividend, which will be paid on the 25th of February.
Territorial Bancorp's next dividend payment will be US$0.23 per share, and in the last 12 months, the company paid a total of US$1.02 per share. Based on the last year's worth of payments, Territorial Bancorp has a trailing yield of 4.1% on the current stock price of $24.59. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Territorial Bancorp can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Territorial Bancorp paying out a modest 45% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Territorial Bancorp earnings per share are up 5.0% per annum over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Territorial Bancorp has increased its dividend at approximately 18% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
From a dividend perspective, should investors buy or avoid Territorial Bancorp? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Territorial Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
While it's tempting to invest in Territorial Bancorp for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 2 warning signs for Territorial Bancorp (1 doesn't sit too well with us) you should be aware of.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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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