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West Bancorporation, Inc. (NASDAQ:WTBA) will increase its dividend on the 23rd of February to US$0.25. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.
West Bancorporation's Earnings Easily Cover the Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, West Bancorporation's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 6.8%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 37%, which we are pretty comfortable with and we think is feasible on an earnings basis.
West Bancorporation Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from US$0.20 to US$1.00. This means that it has been growing its distributions at 17% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. West Bancorporation has seen EPS rising for the last five years, at 16% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
West Bancorporation Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for West Bancorporation that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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.