Eagle Bancorp (NASDAQ:EGBN) Is Due To Pay A Dividend Of $0.45
Eagle Bancorp, Inc. (NASDAQ:EGBN) has announced that it will pay a dividend of $0.45 per share on the 28th of July. The dividend yield will be 8.5% based on this payment which is still above the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Eagle Bancorp's stock price has reduced by 37% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
View our latest analysis for Eagle Bancorp
Eagle Bancorp's Earnings Will Easily Cover The Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Eagle Bancorp is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Taking data from Eagle Bancorp's last earnings report, the payout ratio is at a decent 48%, meaning that the company is able to pay out its dividend with some room to spare.
Over the next year, EPS is forecast to fall by 5.3%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 66%, which would be comfortable for the company to continue in the future.
Eagle Bancorp Doesn't Have A Long Payment History
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The dividend has gone from an annual total of $0.88 in 2019 to the most recent total annual payment of $1.80. This means that it has been growing its distributions at 20% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 4.1% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.1% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
Our Thoughts On Eagle Bancorp's Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Eagle Bancorp (1 is a bit concerning!) that you should be aware of before investing. Is Eagle Bancorp not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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