Eagle Bancorp Montana (NASDAQ:EBMT) Is Increasing Its Dividend To $0.1425

Eagle Bancorp Montana, Inc.'s (NASDAQ:EBMT) dividend will be increasing from last year's payment of the same period to $0.1425 on 6th of September. Based on this payment, the dividend yield for the company will be 3.8%, which is fairly typical for the industry.

Check out our latest analysis for Eagle Bancorp Montana

Eagle Bancorp Montana's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

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 52%, 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 26.7%. If the dividend continues along recent trends, we estimate the future payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Eagle Bancorp Montana Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.29 in 2014 to the most recent total annual payment of $0.57. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Eagle Bancorp Montana has seen earnings per share falling at 3.1% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Eagle Bancorp Montana's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Eagle Bancorp Montana that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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