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If you are interested in cashing in on Macatawa Bank Corporation’s (NASDAQ:MCBC) upcoming dividend of US$0.06 per share, you only have 2 days left to buy the shares before its ex-dividend date, 13 August 2018, in time for dividends payable on the 29 August 2018. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Macatawa Bank’s most recent financial data to examine its dividend characteristics in more detail.
5 questions I ask before picking a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
Is it the top 25% annual dividend yield payer?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has dividend per share risen in the past couple of years?
Is its earnings sufficient to payout dividend at the current rate?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Macatawa Bank fit our criteria?
The current trailing twelve-month payout ratio for the stock is 38.24%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 35.68%, leading to a dividend yield of 2.37%. In addition to this, EPS should increase to $0.81.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Not only have dividend payouts from Macatawa Bank fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, Macatawa Bank generates a yield of 1.94%, which is on the low-side for Banks stocks.
If Macatawa Bank is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three essential factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for MCBC’s future growth? Take a look at our free research report of analyst consensus for MCBC’s outlook.
Valuation: What is MCBC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MCBC is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.