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Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) Looks Interesting, And It's About To Pay A Dividend

Simply Wall St
·4 min read

Readers hoping to buy Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 12th of November to receive the dividend, which will be paid on the 4th of December.

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 2.1% on the current share price of $18.74. If you buy this business for its dividend, you should have an idea of whether Eagle Bancorp Montana's dividend is reliable and sustainable. As a result, readers should always check whether Eagle Bancorp Montana has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Eagle Bancorp Montana

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Eagle Bancorp Montana is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Eagle Bancorp Montana paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Eagle Bancorp Montana's earnings have been skyrocketing, up 33% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Eagle Bancorp Montana has seen its dividend decline 9.3% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Is Eagle Bancorp Montana an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Eagle Bancorp Montana looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Eagle Bancorp Montana for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 4 warning signs for Eagle Bancorp Montana (of which 1 shouldn't be ignored!) you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top 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@simplywallst.com.