TFS Financial Corp's Dividend Analysis
Understanding the Dividend Dynamics of TFS Financial Corp (NASDAQ:TFSL)
TFS Financial Corp (NASDAQ:TFSL) recently announced a dividend of $0.28 per share, payable on 2023-12-13, with the ex-dividend date set for 2023-11-28. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into TFS Financial Corp's dividend performance and assess its sustainability.
What Does TFS Financial Corp Do?
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TFS Financial Corp is the holding company for the Third Federal Savings and Loan Association of Cleveland. The company's ownership in the savings and loan association is its primary business activity. The association's principal business consists of originating and servicing residential real estate mortgage loans and attracting retail savings deposits. It does so by offering products with competitive rates and yields. The company also operates Third Capital, a wholly owned subsidiary that serves as a holding company or as an investor in vehicles such as private equity funds. Third Capital has interests in lease transactions of commercial buildings, title agencies providing escrow and settlement services, and reinsurance of private mortgage insurance on residential loans.
A Glimpse at TFS Financial Corp's Dividend History
TFS Financial Corp has maintained a consistent dividend payment record since 2014, with dividends currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down TFS Financial Corp's Dividend Yield and Growth
As of today, TFS Financial Corp currently has a 12-month trailing dividend yield of 8.29% and a 12-month forward dividend yield of 8.29%, suggesting an expectation of the same dividend payments over the next 12 months. Over the past three years, TFS Financial Corp's annual dividend growth rate was 3.50%. Extended to a five-year horizon, this rate increased to 15.00% per year. Based on TFS Financial Corp's dividend yield and five-year growth rate, the 5-year yield on cost of TFS Financial Corp stock as of today is approximately 16.67%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, TFS Financial Corp's dividend payout ratio is 4.35, which may suggest that the company's dividend may not be sustainable. TFS Financial Corp's profitability rank, as of 2023-09-30, is 4 out of 10, suggesting that the dividend may not be sustainable, despite the company reporting positive net income each year over the past decade.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. TFS Financial Corp's growth rank of 4 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable. TFS Financial Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model, although the revenue has increased by approximately 0.50% per year on average, underperforming approximately 80.45% of global competitors. The company's 3-year EPS growth rate shows a decrease of approximately -2.40% per year on average, underperforming approximately 81.81% of global competitors. Lastly, the company's 5-year EBITDA growth rate of -3.10% also underperforms approximately 84.41% of global competitors.
Next Steps
In conclusion, while TFS Financial Corp has a history of consistent dividend payments and a high current yield, its growth metrics and profitability rank raise questions about the long-term sustainability of these dividends. The low payout ratio may provide some cushion, but the underlying financial performance indicates potential challenges ahead. Investors should consider these factors when evaluating TFS Financial Corp as a dividend investment. For those seeking high-dividend yield stocks, GuruFocus Premium users can utilize the High Dividend Yield Screener for further research.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
