West Bancorporation, Inc.'s (NASDAQ:WTBA) investors are due to receive a payment of $0.25 per share on 21st of August. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

View our latest analysis for West Bancorporation

West Bancorporation's Payment Expected To Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

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 78%, 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 11.3%. Assuming the dividend continues along recent trends, our estimates say the future payout ratio could reach 76% - on the higher side, but we wouldn't necessarily say this is unsustainable.

West Bancorporation Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from $0.44 total annually to $1.00. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. 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

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though West Bancorporation's EPS has declined at around 5.7% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.