Merchants Bancorp (NASDAQ:MBIN) Has Announced A Dividend Of $0.08
Merchants Bancorp's (NASDAQ:MBIN) investors are due to receive a payment of $0.08 per share on 2nd of January. The dividend yield is 0.9% based on this payment, which is a little bit low compared to the other companies in the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Merchants Bancorp's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
See our latest analysis for Merchants Bancorp
Merchants Bancorp's Earnings Will Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.
Having paid out dividends for 6 years, Merchants Bancorp has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Merchants Bancorp's payout ratio sits at 6.0%, an extremely comfortable number that shows that it can pay its dividend.
Looking forward, earnings per share is forecast to fall by 0.8% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 7.4% over the same time period, which we think the company can easily maintain.
Merchants Bancorp Is Still Building Its Track Record
It is great to see that Merchants Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was $0.133, compared to the most recent full-year payment of $0.32. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Merchants Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Merchants Bancorp has seen EPS rising for the last five years, at 28% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
Merchants Bancorp Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. 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. To that end, Merchants Bancorp has 2 warning signs (and 1 which can't be ignored) we think 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.
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.
