Timberland Bancorp, Inc. (NASDAQ:TSBK) will increase its dividend from last year's comparable payment on the 27th of February to $0.29. This makes the dividend yield about the same as the industry average at 3.0%.

Timberland Bancorp's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Timberland Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 27%, which means that Timberland Bancorp would be able to pay its last dividend without pressure on the balance sheet.

If the trend of the last few years continues, EPS will grow by 5.3% over the next 12 months. If the dividend continues along recent trends, we estimate the future payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Timberland Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2016, the dividend has gone from $0.24 total annually to $1.16. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Timberland Bancorp has seen EPS rising for the last five years, at 5.3% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Timberland Bancorp Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Timberland Bancorp in our latest insider ownership analysis. Is Timberland Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.