We Wouldn't Be Too Quick To Buy Territorial Bancorp Inc. (NASDAQ:TBNK) Before It Goes Ex-Dividend
Territorial Bancorp Inc. (NASDAQ:TBNK) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Territorial Bancorp investors that purchase the stock on or after the 10th of May will not receive the dividend, which will be paid on the 25th of May.
The company'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$1.02 to shareholders. Based on the last year's worth of payments, Territorial Bancorp has a trailing yield of 9.1% on the current stock price of $11.21. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Territorial Bancorp has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Territorial Bancorp
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Territorial Bancorp paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies.
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?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Territorial Bancorp's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Territorial Bancorp has lifted its dividend by approximately 8.8% a year on average.
Final Takeaway
Should investors buy Territorial Bancorp for the upcoming dividend? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Territorial Bancorp. To help with this, we've discovered 4 warning signs for Territorial Bancorp (1 is potentially serious!) that you ought to be aware of before buying the shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
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