Timberland Bancorp, Inc. (NASDAQ:TSBK) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of November to $0.25. This makes the dividend yield about the same as the industry average at 3.2%.

View our latest analysis for Timberland Bancorp

Timberland Bancorp's Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

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 31%, 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 1.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 36% by next year, which is in a pretty sustainable range.

Timberland Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was $0.12, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 24% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that Timberland Bancorp's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

We Really Like Timberland Bancorp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Timberland Bancorp management tenure, salary, and performance. Is Timberland Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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