The board of West Bancorporation, Inc. (NASDAQ:WTBA) has announced that it will pay a dividend of $0.25 per share on the 22nd of May. Based on this payment, the dividend yield on the company's stock will be 5.8%, which is an attractive boost to shareholder returns.

View our latest analysis for West Bancorporation

West Bancorporation's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

West Bancorporation has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 76%, which means that West Bancorporation would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS is forecast to expand by 7.8%. If the dividend continues along recent trends, we estimate the future payout ratio could reach 76%, which is on the higher side, but certainly still feasible.

West Bancorporation Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.44, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 8.6% per annum over that time. 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 May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, West Bancorporation's earnings per share has shrunk at approximately 5.2% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for West Bancorporation that investors should take into consideration. Is West Bancorporation not quite the opportunity you were looking for? Why not check out our selection of top 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.