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Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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Simply Wall St
·3 min read
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Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 11th of February, you won't be eligible to receive this dividend, when it is paid on the 5th of March.

Eagle Bancorp Montana's next dividend payment will be US$0.098 per share, and in the last 12 months, the company paid a total of US$0.39 per share. Calculating the last year's worth of payments shows that Eagle Bancorp Montana has a trailing yield of 1.9% on the current share price of $20.74. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Eagle Bancorp Montana

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Eagle Bancorp Montana has a low and conservative payout ratio of just 12% of its income after tax.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Eagle Bancorp Montana has grown its earnings rapidly, up 36% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Eagle Bancorp Montana has lifted its dividend by approximately 3.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Eagle Bancorp Montana is keeping back more of its profits to grow the business.

Final Takeaway

Is Eagle Bancorp Montana worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Eagle Bancorp Montana appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Eagle Bancorp Montana for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Eagle Bancorp Montana (including 1 which shouldn't be ignored).

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.