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This is Why Eagle Bancorp Montana, Inc. (EBMT) is a Great Dividend Stock

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Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.

Cash flow can come from bond interest, interest from other types of investments, and of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Eagle Bancorp Montana, Inc. In Focus

Based in Helena, Eagle Bancorp Montana, Inc. (EBMT - Free Report) is in the Finance sector, and so far this year, shares have seen a price change of -5.79%. Currently paying a dividend of $0.13 per share, the company has a dividend yield of 2.31%. In comparison, the Banks - Midwest industry's yield is 2.54%, while the S&P 500's yield is 1.46%.

Looking at dividend growth, the company's current annualized dividend of $0.50 is up 12.4% from last year. Over the last 5 years, Eagle Bancorp Montana, Inc. has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.83%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Eagle Bancorp Montana, Inc.'s current payout ratio is 23%. This means it paid out 23% of its trailing 12-month EPS as dividend.

EBMT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $2.57 per share, with earnings expected to increase 18.43% from the year ago period.

Bottom Line

Investors like dividends for many reasons; they greatly improve stock investing profits, decrease overall portfolio risk, and carry tax advantages, among others. But, not every company offers a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. Income investors have to be mindful of the fact that high-yielding stocks tend to struggle during periods of rising interest rates. That said, they can take comfort from the fact that EBMT is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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