West Bancorporation (NASDAQ:WTBA) Will Pay A Dividend Of $0.25

West Bancorporation, Inc. (NASDAQ:WTBA) has announced that it will pay a dividend of $0.25 per share on the 24th of May. This means the annual payment is 5.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for West Bancorporation

West Bancorporation's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, West Bancorporation 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 41%, which means that West Bancorporation would be able to pay its last dividend without pressure on the balance sheet.

EPS is set to fall by 28.6% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 61%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

West Bancorporation Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $0.40 total annually to $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. West Bancorporation has seen EPS rising for the last five years, at 10% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

West Bancorporation Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for West Bancorporation that investors need to be conscious of moving forward. Is West Bancorporation not quite the opportunity you were looking for? Why not check out our selection of top 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.