SI Bancorp, Inc. (NASDAQ: IROQ) announced that it will increase its periodic dividend on October 14 to $0.20, which will be 14% higher than last year’s comparable payout amount of $0.175. Despite this increase, the 1.8% dividend yield is only a modest boost to shareholder returns.
IF Bancorp payout should have strong revenue coverage
If predictable over a long period, even low dividend yields can be attractive.
Having paid dividends for 9 years, IF Bancorp has a good track record of paying out a portion of its profits to shareholders. While past records don’t necessarily translate into future results, the company’s 19% payout ratio also shows that IF Bancorp is comfortably able to pay dividends.
Over the next year, EPS could increase by 9.5% if recent trends continue. If the dividend continues to follow recent trends, we estimate the future payout ratio to be 21%, which is within the range that allows us to be comfortable with the sustainability of the dividend.
IF Bancorp does not have a long payment history
The dividend track record has been pretty strong, but with only 9 years of history, we want to see a few more years before drawing any solid conclusions. The dividend went from an annual total of $0.10 in 2013 to the most recent total annual payment of $0.35. This equates to a compound annual growth rate (CAGR) of approximately 15% per year during this period. We’re not too excited about the relatively short history of dividend payouts, but the dividend is growing at a nice pace and we could take a closer look.
The dividend has growth potential
Investors might be attracted to the stock based on the quality of its payment history. We are encouraged to see that IF Bancorp has increased its earnings per share by 9.5% per year over the past five years. IF Bancorp definitely has the potential to increase its dividend in the future with earnings on an uptrend and a low payout ratio.
We really like the IF Bancorp dividend
In summary, it is always positive to see the dividend increase, and we are particularly satisfied with its overall sustainability. Distributions are quite easily covered by earnings, which are also converted into cash flow. Considering all of this, it looks like a good dividend opportunity.
Investors generally tend to favor companies with a consistent and stable dividend policy as opposed to those with an irregular one. Yet investors must consider a host of other factors, aside from dividend payments, when analyzing a company. For example, we identified 2 warning signs for IF Bancorp which you should be aware of before investing. Isn’t IF Bancorp quite the opportunity you’ve been looking for? Why not check out our selection of the best dividend stocks.
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