Readers hoping to buy Midland States Bancorp, Inc. (NASDAQ:MSBI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 15th of August will not receive the dividend, which will be paid on the 23rd of August.
Midland States Bancorp's upcoming dividend is US$0.24 a share, following on from the last 12 months, when the company distributed a total of US$0.97 per share to shareholders. Based on the last year's worth of payments, Midland States Bancorp has a trailing yield of 3.7% on the current stock price of $26.03. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Midland States Bancorp can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Midland States Bancorp's payout ratio is modest, at just 41% of profit.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Midland States Bancorp's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Midland States Bancorp has delivered 10% dividend growth per year on average over the past 3 years.
To Sum It Up
Is Midland States Bancorp an attractive dividend stock, or better left on the shelf? Earnings per share have been flat in recent years, although Midland States Bancorp reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Midland States Bancorp appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Curious what other investors think of Midland States Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.