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This is Why Eagle Bancorp Montana (EBMT) is a Great Dividend Stock

Zacks Equity Research

Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its dividend yield, a metric that measures the dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Eagle Bancorp Montana in Focus

Eagle Bancorp Montana (EBMT) is headquartered in Helena, and is in the Finance sector. The stock has seen a price change of 2.12% since the start of the year. The bank holding company is currently shelling out a dividend of $0.09 per share, with a dividend yield of 2.2%. This compares to the Banks - Midwest industry's yield of 2.57% and the S&P 500's yield of 1.87%.

In terms of dividend growth, the company's current annualized dividend of $0.37 is up 1.4% from last year. Over the last 5 years, Eagle Bancorp Montana has increased its dividend 5 times on a year-over-year basis for an average annual increase of 5.63%. Future dividend growth will depend on earnings growth as well as payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Eagle Bancorp Montana's current payout ratio is 30%. This means it paid out 30% of its trailing 12-month EPS as dividend.

Earnings growth looks solid for EBMT for this fiscal year. The Zacks Consensus Estimate for 2019 is $1.49 per share, which represents a year-over-year growth rate of 39.25%.

Bottom Line

Investors like dividends for a variety of different reasons, from tax advantages and decreasing overall portfolio risk to considerably improving stock investing profits. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that EBMT is not only an attractive dividend play, but is also a compelling investment opportunity with a Zacks Rank of #1 (Strong Buy).


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