West Bancorporation (NASDAQ:WTBA) Is Paying Out A Dividend Of $0.25

The board of West Bancorporation, Inc. (NASDAQ:WTBA) has announced that it will pay a dividend of $0.25 per share on the 21st of August. The dividend yield will be 4.8% based on this payment which is still above the industry average.

View our latest analysis for West Bancorporation

West Bancorporation's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

West Bancorporation has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on West Bancorporation's last earnings report, the payout ratio is at a decent 78%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to expand by 11.3%. Assuming the dividend continues along recent trends, our estimates say the future payout ratio could reach 76% - on the higher side, but we wouldn't necessarily say this is unsustainable.

West Bancorporation 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 $0.44 in 2014 to the most recent total annual payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, West Bancorporation's earnings per share has shrunk at approximately 5.7% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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.

Our Thoughts On West Bancorporation's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about West Bancorporation's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

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. Now, if you want to look closer, it would be worth checking out our free research on West Bancorporation management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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