In This Article:
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) is about to go ex-dividend in just 3 days. You can purchase shares before the 13th of February in order to receive the dividend, which the company will pay on the 6th of March.
Eagle Bancorp Montana's next dividend payment will be US$0.095 per share, and in the last 12 months, the company paid a total of US$0.38 per share. Calculating the last year's worth of payments shows that Eagle Bancorp Montana has a trailing yield of 1.8% on the current share price of $21.29. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Eagle Bancorp Montana
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Eagle Bancorp Montana paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Eagle Bancorp Montana paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Eagle Bancorp Montana's earnings have been skyrocketing, up 20% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Eagle Bancorp Montana's dividend payments per share have declined at 9.4% per year on average over the past ten years, which is uninspiring. Eagle Bancorp Montana is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.