Eagle Bancorp Montana (NASDAQ:EBMT) Is Increasing Its Dividend To $0.14

The board of Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) has announced that it will be paying its dividend of $0.14 on the 1st of September, an increased payment from last year's comparable dividend. This makes the dividend yield 4.2%, which is above the industry average.

See our latest analysis for Eagle Bancorp Montana

Eagle Bancorp Montana's Dividend Forecasted To Be Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Eagle Bancorp Montana has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 36%, which means that Eagle Bancorp Montana would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 3.1%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 37% by next year, which is in a pretty sustainable range.

Eagle Bancorp Montana Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.285 in 2013 to the most recent total annual payment of $0.56. This means that it has been growing its distributions at 7.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Eagle Bancorp Montana has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We should note that Eagle Bancorp Montana has issued stock equal to 21% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Eagle Bancorp Montana 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. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Eagle Bancorp Montana that you should be aware of before investing. Is Eagle Bancorp Montana 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.