Eagle Bancorp (NASDAQ:EGBN) Has Affirmed Its Dividend Of $0.45

Eagle Bancorp, Inc. (NASDAQ:EGBN) will pay a dividend of $0.45 on the 31st of January. The dividend yield will be 5.8% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Eagle Bancorp's stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Eagle Bancorp

Eagle Bancorp's Payment Expected To Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Having paid out dividends for 5 years, Eagle Bancorp has a good history of paying out a part of its earnings to shareholders. Based on Eagle Bancorp's last earnings report, the payout ratio is at a decent 45%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 33.8% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 64% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Eagle Bancorp Is Still Building Its Track Record

It is great to see that Eagle Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.88 in 2018 to the most recent total annual payment of $1.80. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Eagle 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. The company has been growing at a pretty soft 1.9% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Eagle Bancorp is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Eagle Bancorp has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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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