West Bancorporation's (NASDAQ:WTBA) Dividend Will Be $0.25

West Bancorporation, Inc. (NASDAQ:WTBA) has announced that it will pay a dividend of $0.25 per share on the 22nd of May. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.

View 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.

West Bancorporation has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but West Bancorporation's payout ratio of 76% is a good sign as this means that earnings decently cover dividends.

EPS is set to grow by 7.8% over the next year. If recent patterns in the dividend continues, the future payout ratio in 12 months could be 76% which is a bit high but can definitely be sustainable.

West Bancorporation Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.44 in 2014, and the most recent fiscal year payment was $1.00. This means that it has been growing its distributions at 8.6% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth May Be Hard To Come By

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that West Bancorporation's earnings per share has fallen at approximately 5.2% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.