IF Bancorp, Inc.'s (NASDAQ:IROQ) investors are due to receive a payment of $0.20 per share on 15th of April. This payment means the dividend yield will be 1.7%, which is below the average for the industry.

See our latest analysis for IF Bancorp

IF Bancorp's Payment Expected To Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

IF 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 42%, which means that IF Bancorp would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS could fall by 5.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the future payout ratio could be 51%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

IF Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was $0.10, compared to the most recent full-year payment of $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

IF Bancorp May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that IF Bancorp's earnings per share has fallen at approximately 5.0% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On IF Bancorp's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, IF Bancorp has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is IF Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.