The board of West Bancorporation, Inc. (NASDAQ:WTBA) has announced that it will pay a dividend on the 20th of November, with investors receiving $0.25 per share. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

Check out our latest analysis for West Bancorporation

West Bancorporation's Dividend Forecasted To Be Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained.

West Bancorporation has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on West Bancorporation's last earnings report, the payout ratio is at a decent 78%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 91.6%. For the same time horizon, analysts estimate that the future payout ratio could be 48% which would be quite comfortable going to take the dividend forward.

West Bancorporation Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.48 total annually to $1.00. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. West Bancorporation has seen earnings per share falling at 5.9% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about West Bancorporation's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in West Bancorporation stock. Is West Bancorporation not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.