Mercantile Bank (NASDAQ:MBWM) Is Increasing Its Dividend To $0.33
Mercantile Bank Corporation (NASDAQ:MBWM) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of June to $0.33. This takes the dividend yield to 4.6%, which shareholders will be pleased with.
See our latest analysis for Mercantile Bank
Mercantile Bank'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.
Mercantile Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 29%, which means that Mercantile Bank would be able to pay its last dividend without pressure on the balance sheet.
EPS is set to fall by 10.6% over the next 12 months. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 36%, which would be comfortable for the company to continue in the future.
Mercantile Bank Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.36 in 2013 to the most recent total annual payment of $1.32. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Mercantile Bank has grown earnings per share at 16% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Mercantile Bank's prospects of growing its dividend payments in the future.
We Really Like Mercantile Bank's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Mercantile Bank (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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