Eagle Bancorp (NASDAQ:EGBN) Will Pay A Dividend Of $0.45

The board of Eagle Bancorp, Inc. (NASDAQ:EGBN) has announced that it will pay a dividend of $0.45 per share on the 28th of July. The dividend yield will be 8.5% 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. Eagle Bancorp's stock price has reduced by 37% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for Eagle Bancorp

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Eagle Bancorp has a short history of paying out dividends, with its current track record at only 4 years. Based on Eagle Bancorp's last earnings report, calculating for its payout ratio equates to 48%, which means that the company covered its last dividend with comfortable room to spare.

Looking forward, earnings per share is forecast to fall by 5.3% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 66%, which would be comfortable for the company to continue in the future.

Eagle Bancorp Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The annual payment during the last 4 years was $0.88 in 2019, and the most recent fiscal year payment was $1.80. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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. Earnings have grown at around 4.1% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 4.1% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, a consistent dividend is a good thing, and we think that Eagle Bancorp has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Eagle Bancorp you should be aware of, and 1 of them makes us a bit uncomfortable. 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.