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The board of Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) has announced that it will be paying its dividend of $0.14 on the 1st of September, an increased payment from last year's comparable dividend. This makes the dividend yield 4.2%, which is above the industry average.
View our latest analysis for Eagle Bancorp Montana
Eagle Bancorp Montana's Payment Expected To Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much.
Eagle Bancorp Montana has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Eagle Bancorp Montana's last earnings report, the payout ratio is at a decent 36%, meaning that the company is able to pay out its dividend with a bit of room to spare.
Looking forward, earnings per share is forecast to rise by 3.1% over the next year. If the dividend continues on this path, the future payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.
Eagle Bancorp Montana Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.285 in 2013, and the most recent fiscal year payment was $0.56. This means that it has been growing its distributions at 7.0% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Eagle Bancorp Montana has grown earnings per share at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Eagle Bancorp Montana's prospects of growing its dividend payments in the future.
We should note that Eagle Bancorp Montana has issued stock equal to 21% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
Eagle Bancorp Montana Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.