Unveiling TFS Financial Corp's Dividend Prowess: A Comprehensive Analysis
Exploring the Dividend Performance and Sustainability of TFS Financial Corp (NASDAQ:TFSL)
TFS Financial Corp(NASDAQ:TFSL) recently announced a dividend of $0.28 per share, payable on 2023-09-26, with the ex-dividend date set for 2023-09-11. 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 deep dive into TFS Financial Corps 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. Dividends are 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 8.37% and a 12-month forward dividend yield of 8.37%. This suggests an expectation of 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 16.84%.
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 2023-06-30, TFS Financial Corp's dividend payout ratio is 3.90. This may suggest that the company's dividend may not be sustainable.
TFS Financial Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks TFS Financial Corp's profitability 5 out of 10 as of 2023-06-30, suggesting fair profitability. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
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 5 out of 10 suggests that the company has a fair growth outlook.
Revenue is the lifeblood of any company, and TFS Financial Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. TFS Financial Corp's revenue has increased by approximately 0.50% per year on average, a rate that underperforms than approximately 80.34% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, TFS Financial Corp's earnings increased by approximately -2.40% per year on average, a rate that underperforms than approximately 81.41% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -3.10%, which underperforms than approximately 84.08% of global competitors.
Concluding Thoughts
In conclusion, TFS Financial Corp has demonstrated a consistent dividend payment history with a promising yield. However, its low payout ratio and underperforming growth metrics compared to global competitors raise concerns about the sustainability of its dividends in the long run. Investors should thus exercise caution and consider all these factors before making investment decisions.
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This article first appeared on GuruFocus.
