Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Eagle Bancorp Montana, Inc. (NASDAQ:EBMT) is about to go ex-dividend in just 4 days. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Eagle Bancorp Montana's shares on or after the 14th of August will not receive the dividend, which will be paid on the 4th of September.

The company's next dividend payment will be US$0.1475 per share. Last year, in total, the company distributed US$0.59 to shareholders. Last year's total dividend payments show that Eagle Bancorp Montana has a trailing yield of 2.5% on the current share price of US$23.82. If you buy this business for its dividend, you should have an idea of whether Eagle Bancorp Montana's dividend is reliable and sustainable. 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. Fortunately Eagle Bancorp Montana's payout ratio is modest, at just 28% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Eagle Bancorp Montana's earnings per share have fallen at approximately 8.0% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Eagle Bancorp Montana has delivered 6.6% dividend growth per year on average over the past 10 years.

Final Takeaway

Should investors buy Eagle Bancorp Montana for the upcoming dividend? Earnings per share have shrunk noticeably in recent years, although we like that the company has a low payout ratio. This could suggest a cut to the dividend may not be a major risk in the near future. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

Curious what other investors think of Eagle Bancorp Montana? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.