Eagle Bancorp, Inc. (NASDAQ:EGBN) stock is about to trade ex-dividend in four days. Ex-dividend means that investors that purchase the stock on or after the 20th of April will not receive this dividend, which will be paid on the 3rd of May.
Eagle Bancorp's next dividend payment will be US$0.25 per share. Last year, in total, the company distributed US$0.88 to shareholders. Based on the last year's worth of payments, Eagle Bancorp stock has a trailing yield of around 1.8% on the current share price of $54.18. 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.
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 is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
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. With that in mind, we're encouraged by the steady growth at Eagle Bancorp, with earnings per share up 9.9% on average over the last 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 past two years, Eagle Bancorp has increased its dividend at approximately 6.6% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy Eagle Bancorp for the upcoming dividend? Eagle Bancorp has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. 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.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for Eagle Bancorp that we recommend you consider before investing in the business.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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.
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