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Income Investors Should Steer Clear of Territorial Bancorp Inc (NASDAQ:TBNK)

Miguel Kauffman

Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Territorial Bancorp Inc (NASDAQ:TBNK) has returned to shareholders over the past 8 years, an average dividend yield of 3.00% annually. Does Territorial Bancorp tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. View out our latest analysis for Territorial Bancorp

5 questions I ask before picking a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

  • Is their annual yield among the top 25% of dividend payers?

  • Does it consistently pay out dividends without missing a payment of significantly cutting payout?

  • Has it increased its dividend per share amount over the past?

  • Can it afford to pay the current rate of dividends from its earnings?

  • Will it have the ability to keep paying its dividends going forward?

NasdaqGS:TBNK Historical Dividend Yield June 25th 18
NasdaqGS:TBNK Historical Dividend Yield June 25th 18

Does Territorial Bancorp pass our checks?

Territorial Bancorp has a trailing twelve-month payout ratio of 48.20%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Territorial Bancorp as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, Territorial Bancorp generates a yield of 3.80%, which is high for Mortgage stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into Territorial Bancorp’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key aspects you should further examine:

  1. Future Outlook: What are well-informed industry analysts predicting for TBNK’s future growth? Take a look at our free research report of analyst consensus for TBNK’s outlook.

  2. Historical Performance: What has TBNK’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.