- Oops!Something went wrong.Please try again later.
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Macatawa Bank Corporation (NASDAQ:MCBC) has paid a dividend to shareholders. It currently yields 2.1%. Does Macatawa Bank tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is their annual yield among the top 25% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Macatawa Bank pass our checks?
Macatawa Bank has a trailing twelve-month payout ratio of 38%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 36%, leading to a dividend yield of around 2.6%. Furthermore, EPS should increase to $0.81.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Dividend payments from Macatawa Bank have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, Macatawa Bank has a yield of 2.1%, which is on the low-side for Banks stocks.
Taking all the above into account, Macatawa Bank is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important 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 email@example.com.