Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Eagle Bancorp, Inc. (NASDAQ:EGBN) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 14th of April in order to receive the dividend, which the company will pay on the 30th of April.
Eagle Bancorp’s upcoming dividend is US$0.22 a share, following on from the last 12 months, when the company distributed a total of US$0.88 per share to shareholders. Calculating the last year’s worth of payments shows that Eagle Bancorp has a trailing yield of 2.7% on the current share price of $32.8. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for Eagle Bancorp
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. Eagle Bancorp paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Eagle Bancorp’s earnings per share have been growing at 16% a year for the past five years.
Unfortunately Eagle Bancorp has only been paying a dividend for a year or so, so there’s not much of a history to draw insight from.
To Sum It Up
Is Eagle Bancorp worth buying for its dividend? Companies like Eagle Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term – as long as it’s done without issuing too many new shares. Eagle Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
On that note, you’ll want to research what risks Eagle Bancorp is facing. Our analysis shows 3 warning signs for Eagle Bancorp that we strongly recommend you have a look at before investing in the company.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at [email protected] This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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