Should You Buy Territorial Bancorp Inc. (NASDAQ:TBNK) For Its Upcoming Dividend?
Territorial Bancorp Inc. (NASDAQ:TBNK) stock is about to trade ex-dividend in 4 days. Ex-dividend means that investors that purchase the stock on or after the 12th of August will not receive this dividend, which will be paid on the 27th of August.
Territorial Bancorp's next dividend payment will be US$0.23 per share, on the back of last year when the company paid a total of US$1.42 to shareholders. Based on the last year's worth of payments, Territorial Bancorp stock has a trailing yield of around 6.5% on the current share price of $22.01. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Territorial Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Territorial Bancorp paid out a comfortable 44% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Territorial Bancorp, with earnings per share up 6.2% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Territorial Bancorp has delivered 22% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Territorial Bancorp for the upcoming dividend? Territorial Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, Territorial Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
So while Territorial Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Territorial Bancorp has 2 warning signs we think you should be aware of.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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