Last update on 2024-06-27

Timberland Bancorp (TSBK) - Dividend Analysis (Final Score: 3/8)

Comprehensive dividend analysis of Timberland Bancorp (TSBK) using an 8-criteria scoring system. Find out the performance and stability trends over 20 years.

Short Analysis - Dividend Score: 3

We're running Timberland Bancorp (TSBK) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Timberland Bancorp (TSBK) evaluated the company's performance based on an 8-criteria scoring system and provided insights into its dividend yield, growth rate, payout ratio, earnings and cash flow coverage, dividend stability, longstanding payment history, and stock repurchases. Key findings include: 1. Dividend yield is below the industry average. 2. The growth rate has been inconsistent and lower than the desirable 5% average annually over the past 20 years. 3. Historically negative payout ratio but stable in recent years below 65%. 4. Inconsistent earnings coverage but showing improvement. 5. Better recent coverage by cash flow indicating prudent management. 6. Mixed performances in dividend stability with notable volatility. 7. Not consistently paying dividends over 25 years. 8. Inconsistent but notable stock repurchases over 20 years.

Insights for Value Investors Seeking Stable Income

Although Timberland Bancorp (TSBK) has shown some positive trends in recent years, like better cash flow coverage and a more stable payout ratio, the overall dividend performance is concerning due to historical volatility, inconsistent growth, and lower-than-industry-average yield. As an investor seeking dependable dividend income, it might be worthwhile to explore other opportunities. However, if you are looking for a company demonstrating signs of recovery and willing to take on a bit more risk, TSBK could still be of interest. Exercise caution and conduct further research or consult with a financial advisor before making any investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

what the dividend yield criterion is and its importance in evaluating a company's dividend health and comparability.

The dividend yield for Timberland Bancorp (TSBK) for 2023 stands at 1.4622%, which is notably below the industry average of 2.76%. Historically, TSBK's dividend yield fluctuated widely, reaching a peak of 6.982% in 2009 and having several years where no dividends were paid (2010-2012). When contextualized against the industry, TSBK’s yield has been both above and below the industry average, often aligning more with the broader economic conditions. The current yield reflects a conservative payout strategy relative to industry norms, which might suggest several potential concerns. A lower dividend yield can indicate either strong price appreciation or a conservative dividend-payout approach. Given the company’s historical yield range and recent performance, this trend might be construed as less favorable for income-focused investors, though it may also reflect prudent financial management or a strategic reinvestment focus.

Average annual Growth Rate higher than 5% in the last 20 years?

Evaluating a company's dividend growth rate over a significant period, such as 20 years, helps investors understand the firm's long-term commitment to returning value to shareholders through dividends. A growth rate higher than 5% is often seen as a positive indicator of robust financial health and profitability.

Let's delve into the given data. The dividend grow rate presents extreme volatility during the considered period, as evidenced by the wide range between -100% and 73.91%. Particularly alarming are the negative spikes in 2009 and 2010, showing dividends were completely cut. Despite these low points, there have been years of significant recovery, e.g., 2014 and 2019 with 50% and 73.91% growth, respectively. However, considering the average dividend ratio of 2.04% over 20 years - considerably less than the 5% threshold - we can conclude that, unfortunately, TSBK has not consistently met the desired dividend growth rate. Therefore, this trend is negative when using 5% as the benchmark.

Average annual Payout Ratio lower than 65% in the last 20 years?

Criterion 1.2 focuses on the average payout ratio of a company over the last 20 years, a measure that reveals the proportion of earnings distributed as dividends. Generally, a payout ratio lower than 65% is considered sustainable and suggests that the company retains adequate earnings for growth and operational needs. Evaluating this metric is crucial to understand the long-term dividend reliability and financial stability of the company.

Over the past 20 years, Timberland Bancorp (TSBK) has exhibited an average payout ratio that stands at -17.06%. This negative value is heavily influenced by extremely low or negative payout ratios in several years. Notably, the payout ratio was -849.31% in 2009 and -2.93% in 2010, years that likely reflected significant financial strain possibly due to external economic conditions such as the financial crisis. Despite the negative average, the last few years show more stability and positive payout ratios, with figures well below the 65% benchmark. Specifically, the payout ratios for 2017 to 2023 have consistently remained below 35%. This is a favorable trend, indicating that the company appears to have recovered from past anomalies and is now demonstrating a sustainable payout policy that bodes well for future dividend reliability.

Dividends Well Covered by Earnings?

Dividends being covered by earnings per share (EPS) is crucial as it indicates the company's ability to sustain dividend payments. Higher cover ratios suggest financial stability and a reduced risk of a dividend cut.

The given data for Timberland Bancorp (TSBK) shows that the dividends per share to EPS coverage ratio has varied widely over the years. Specifically, from 2003 to 2008, coverage hovered around 0.3 to 0.4, apart from 2008 which saw a significant drop in EPS versus dividends. During the 2009 financial crisis, EPS were negative, making the ratio meaningless. Post-crisis, from 2011 onwards, the EPS coverage ratio saw an improvement with a trend towards stabilization from 2013 to 2018 around the 0.2 - 0.3 range, signaling better financial health. The highest coverage ratios occurred in recent years, with 2022 and 2020 showing coverage of 0.25 and 0.3 respectively, but 2023 dropped alarmingly to 0.14. This trend overall suggests improved but inconsistent coverage, highlighting periods of vulnerability especially during financial downturns.

Dividends Well Covered by Cash Flow?

Why the dividends should be well covered by cash flow and what implications this has for the company

Evaluating the ratio of dividends covered by free cash flow for Timberland Bancorp (TSBK) from 2003 to 2023, the data shows a generally fluctuating trend. The highest coverage was in 2006 (0.42), meaning the company could pay its dividends comfortably out of its cash flow. Contrastingly, in 2011 no dividends were paid, showing potential cash constraints or strategic reserve build-up. Forward to recent years, specifically from 2019 to 2023, the trend stabilizes around the 0.28 to 0.40 range, indicating more consistent dividend coverage. This is a good sign, showing prudent financial management, ensuring dividends are maintainable without straining cash reserves.

Stable Dividends Since the Company Began Paying Dividends?

The stability of dividends over a long period is crucial for income-seeking investors as it demonstrates reliability and consistency in returns.

Timberland Bancorp (TSBK) has exhibited a mixed performance in terms of dividend stability across the past two decades. While the period from 2003 to 2008 showed a consistent increase (from $0.26 to $0.44), there was a notable decline in 2009 to $0.31 followed by an almost complete cut from 2010 to 2012, with dividends dropping to nearly zero. From 2013 onwards, dividends began to recover and saw substantial growth, peaking at $0.98 in 2022. However, in 2023, there was another noticeable drop to $0.46, which is more than 50% from the previous year. This volatility, particularly the significant drops, indicates instability, making it a less ideal choice for income-seeking investors looking for reliable dividend income. Therefore, the trend over the long term is not favorable when considering dividend stability.

Dividends Paid for Over 25 Years?

Explain the criterion for Timberland Bancorp (TSBK) and why it is important to consider

This criterion assesses whether Timberland Bancorp (TSBK) has paid dividends consistently for over 25 years. It is vital because it indicates the company's stability and reliability in returning value to its shareholders. A long track record of paying dividends demonstrates financial health and shareholder commitment, which are attractive traits for potential investors.

Reliable Stock Repurchases Over the Past 20 Years?

Why shareholders value companies that reliably repurchase their stock over long periods

Timberland Bancorp (TSBK) has indeed shown a measure of reliability in repurchasing its stock over the last 20 years. Over these two decades, the total number of shares has decreased noticeably from 7,998,795 in 2003 to 8,175,898 in 2023. Financially, these repurchases are significant for shareholders as they generally signal that the company believes its stock is undervalued, thereby demonstrating management's confidence. Persistent buybacks can help support the stock price and improve per-share metrics like earnings and dividends per share. However, the trend is inconsistent, with repurchases clustered mainly in certain years such as 2004, 2005, 2007, 2008, 2022, and 2023.