The board of Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) has announced that it will pay a dividend on the 6th of June, with investors receiving $0.1425 per share. This payment means that the dividend yield will be 3.3%, which is around the industry average.

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Eagle Bancorp Montana's Dividend Forecasted To Be Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time.

Eagle Bancorp Montana has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 30%, 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 13.9%. If the dividend continues along recent trends, we estimate the future payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Eagle Bancorp Montana

Eagle Bancorp Montana Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.30 in 2015, and the most recent fiscal year payment was $0.57. This implies that the company grew its distributions at a yearly rate of about 6.6% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Eagle Bancorp Montana has seen earnings per share falling at 7.4% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Eagle Bancorp Montana that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.