Eagle Bancorp Montana (NASDAQ:EBMT) Could Be A Buy For Its Upcoming Dividend
It looks like Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 13th of May will not receive this dividend, which will be paid on the 4th of June.
Eagle Bancorp Montana's next dividend payment will be US$0.098 per share, on the back of last year when the company paid a total of US$0.39 to shareholders. Last year's total dividend payments show that Eagle Bancorp Montana has a trailing yield of 1.7% on the current share price of $22.97. 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.
View our latest analysis for Eagle Bancorp Montana
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Eagle Bancorp Montana is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Eagle Bancorp Montana's earnings have been skyrocketing, up 37% per annum 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 3.4% a year on average. 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.
The Bottom Line
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. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Eagle Bancorp Montana ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
So while Eagle Bancorp Montana looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Eagle Bancorp Montana (of which 1 makes us a bit uncomfortable!) 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.
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