Eagle Bancorp Montana (NASDAQ:EBMT) Could Be A Buy For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Eagle Bancorp Montana investors that purchase the stock on or after the 12th of August will not receive the dividend, which will be paid on the 3rd of September.
The company's next dividend payment will be US$0.13 per share, on the back of last year when the company paid a total of US$0.50 to shareholders. Based on the last year's worth of payments, Eagle Bancorp Montana has a trailing yield of 2.2% on the current stock price of $22.47. If you buy this business for its dividend, you should have an idea of whether Eagle Bancorp Montana's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
See 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 paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Eagle Bancorp Montana has grown its earnings rapidly, up 34% 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. Eagle Bancorp Montana has delivered 6.0% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
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. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Eagle Bancorp Montana more closely.
In light of that, while Eagle Bancorp Montana has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Eagle Bancorp Montana and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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.
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