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West Bancorporation, Inc. (NASDAQ:WTBA) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 9th of February in order to be eligible for this dividend, which will be paid on the 24th of February.
West Bancorporation's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Based on the last year's worth of payments, West Bancorporation has a trailing yield of 4.2% on the current stock price of $21. If you buy this business for its dividend, you should have an idea of whether West Bancorporation's dividend is reliable and sustainable. So we need to investigate whether West Bancorporation can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. West Bancorporation paid out a comfortable 42% of its profit last year.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at West Bancorporation, with earnings per share up 7.9% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, West Bancorporation has lifted its dividend by approximately 16% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is West Bancorporation an attractive dividend stock, or better left on the shelf? West Bancorporation has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Overall, West Bancorporation looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Want to learn more about West Bancorporation? Here's a visualisation of its historical rate of revenue and earnings growth.
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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