Mercantile Bank's (NASDAQ:MBWM) Dividend Will Be Increased To $0.34
Mercantile Bank Corporation's (NASDAQ:MBWM) dividend will be increasing from last year's payment of the same period to $0.34 on 13th of September. This takes the annual payment to 3.9% of the current stock price, which is about average for the industry.
Check out our latest analysis for Mercantile Bank
Mercantile Bank's Earnings Will Easily Cover The Distributions
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Mercantile Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Mercantile Bank's payout ratio of 26% is a good sign as this means that earnings decently cover dividends.
Looking forward, earnings per share is forecast to fall by 14.5% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 35%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Mercantile Bank 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. The annual payment during the last 10 years was $0.36 in 2013, and the most recent fiscal year payment was $1.32. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Mercantile Bank has seen EPS rising for the last five years, at 17% per annum. Mercantile Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Mercantile Bank Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Mercantile Bank that investors should know about before committing capital to this stock. 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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