Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. However, when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.
Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends account for significant portions of long-term returns, with dividend contributions exceeding one-third of total returns in many cases.
Eagle Bancorp Montana in Focus
Eagle Bancorp Montana (EBMT) is headquartered in Helena, and is in the Finance sector. The stock has seen a price change of 2.12% since the start of the year. The bank holding company is currently shelling out a dividend of $0.09 per share, with a dividend yield of 2.2%. This compares to the Banks - Midwest industry's yield of 2.4% and the S&P 500's yield of 1.92%.
Looking at dividend growth, the company's current annualized dividend of $0.37 is up 1.4% from last year. Over the last 5 years, Eagle Bancorp Montana has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.68%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Right now, Eagle Bancorp Montana's payout ratio is 35%, which means it paid out 35% of its trailing 12-month EPS as dividend.
Looking at this fiscal year, EBMT expects solid earnings growth. The Zacks Consensus Estimate for 2019 is $1.63 per share, which represents a year-over-year growth rate of 52.34%.
Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. However, not all companies offer a quarterly payout.
For instance, it's a rare occurrence when a tech start-up or big growth business offers their shareholders a dividend. It's more common to see larger companies with more established profits give out dividends. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that EBMT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).
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Eagle Bancorp Montana, Inc. (EBMT) : Free Stock Analysis Report
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