Eagle Bancorp Montana's (NASDAQ:EBMT) Dividend Will Be $0.14

The board of Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) has announced that it will pay a dividend of $0.14 per share on the 7th of June. Based on this payment, the dividend yield on the company's stock will be 4.4%, which is an attractive boost to shareholder returns.

View our latest analysis for Eagle Bancorp Montana

Eagle Bancorp Montana's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Eagle Bancorp Montana has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 38%, which means that Eagle Bancorp Montana would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to rise by 22.9% over the next year. 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

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.29 in 2014, and the most recent fiscal year payment was $0.56. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Eagle Bancorp Montana May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.1% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Eagle Bancorp Montana could always pay out a higher proportion of earnings to increase shareholder returns.

Eagle Bancorp Montana Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Eagle Bancorp Montana might even raise payments in the future. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Eagle Bancorp Montana that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.