Territorial Bancorp (NASDAQ:TBNK) Has Announced That Its Dividend Will Be Reduced To $0.05
Territorial Bancorp Inc.'s (NASDAQ:TBNK) dividend is being reduced from last year's payment covering the same period to $0.05 on the 24th of November. However, the dividend yield of 3.7% still remains in a typical range for the industry.
Check out our latest analysis for Territorial Bancorp
Territorial Bancorp's Payment Expected To Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much.
Having distributed dividends for at least 10 years, Territorial Bancorp has a long history of paying out a part of its earnings to shareholders. Although the company has a long history in paying out dividends, Territorial Bancorp's latest earnings report shows a payout ratio of 99%. This figure could be worrying with regards to the sustainability of the company's dividends, as earnings just barely cover its dividend payments.
Over the next 3 years, EPS is forecast to fall by 3.3%. Analyst estimates however show the future payout ratio being 32% in that same time horizon which brings it into quite a comfortable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from $0.48 total annually to $0.30. Doing the maths, this is a decline of about 4.6% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Territorial Bancorp's EPS has declined at around 12% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
Territorial Bancorp's Dividend Doesn't Look Great
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Territorial Bancorp (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
