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

The board of Eagle Bancorp, Inc. (NASDAQ:EGBN) has announced that it will pay a dividend on the 31st of July, with investors receiving $0.45 per share. The dividend yield will be 7.8% based on this payment which is still above the industry average.

See our latest analysis for Eagle Bancorp

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

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. Past distributions do not necessarily guarantee future ones, but Eagle Bancorp's payout ratio of 71% is a good sign for current shareholders as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 6.6%. The future payout ratio could be 35% over that time period, according to analyst estimates, which is a good look for the future 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 2019 to the most recent total annual payment of $1.80. This means that it has been growing its distributions at 15% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Earnings per share has been sinking by 10% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Eagle Bancorp 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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