Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) will increase its dividend from last year's comparable payment on the 6th of September to $0.1425. This makes the dividend yield 4.5%, which is above the industry average.

See our latest analysis for Eagle Bancorp Montana

Eagle Bancorp Montana's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Eagle Bancorp Montana has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 52%, which means that Eagle Bancorp Montana would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 27.1%. If the dividend continues on this path, the future payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Eagle Bancorp Montana Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.29 total annually to $0.57. 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'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. However, initial appearances might be deceiving. Over the past five years, it looks as though Eagle Bancorp Montana's EPS has declined at around 3.1% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Eagle Bancorp Montana that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.