Mercantile Bank's (NASDAQ:MBWM) Dividend Will Be Increased To $0.33
The board of Mercantile Bank Corporation (NASDAQ:MBWM) has announced that it will be paying its dividend of $0.33 on the 14th of June, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.
See our latest analysis for Mercantile Bank
Mercantile Bank's Payment Expected To Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
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 29% is a good sign as this means that earnings decently cover dividends.
Over the next year, EPS is forecast to fall by 10.6%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 36%, which we are pretty comfortable with and we think would be feasible on an earnings basis.
Mercantile Bank Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the annual payment back then was $0.36, compared to the most recent full-year payment of $1.32. This means that it has been growing its distributions at 14% per annum 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
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Mercantile Bank has been growing its earnings per share at 16% a year over the past five years. 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. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Mercantile Bank that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
