Readers hoping to buy Mid Penn Bancorp, Inc. (NASDAQ:MPB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 4th of February will not receive this dividend, which will be paid on the 24th of February.
Mid Penn Bancorp's next dividend payment will be US$0.23 per share, on the back of last year when the company paid a total of US$0.77 to shareholders. Looking at the last 12 months of distributions, Mid Penn Bancorp has a trailing yield of approximately 3.2% on its current stock price of $24. 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 check whether the dividend payments are covered, and if earnings are growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mid Penn Bancorp paid out a comfortable 34% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Mid Penn Bancorp, with earnings per share up 6.4% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mid Penn Bancorp has delivered an average of 1.9% per year annual increase in its dividend, based on the past ten years of dividend payments.
The Bottom Line
From a dividend perspective, should investors buy or avoid Mid Penn Bancorp? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Mid Penn Bancorp more closely.
Curious about whether Mid Penn Bancorp has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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