Readers hoping to buy Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Eagle Bancorp Montana's shares before the 16th of May to receive the dividend, which will be paid on the 6th of June.

The company's next dividend payment will be US$0.1425 per share. Last year, in total, the company distributed US$0.57 to shareholders. Calculating the last year's worth of payments shows that Eagle Bancorp Montana has a trailing yield of 3.3% on the current share price of US$17.49. If you buy this business for its dividend, you should have an idea of whether Eagle Bancorp Montana's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Eagle Bancorp Montana paying out a modest 40% of its earnings.

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.

See our latest analysis for Eagle Bancorp Montana

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Eagle Bancorp Montana's earnings per share have been shrinking at 3.8% a year over the previous 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, Eagle Bancorp Montana has lifted its dividend by approximately 6.6% a year on average.

The Bottom Line

Is Eagle Bancorp Montana an attractive dividend stock, or better left on the shelf? Eagle Bancorp Montana's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.