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Mid Penn Bancorp, Inc. (NASDAQ:MPB) stock is about to trade ex-dividend in four days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. In other words, investors can purchase Mid Penn Bancorp's shares before the 8th of May in order to be eligible for the dividend, which will be paid on the 26th of May.
The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$0.80 to shareholders. Looking at the last 12 months of distributions, Mid Penn Bancorp has a trailing yield of approximately 2.7% on its current stock price of US$29.27. If you buy this business for its dividend, you should have an idea of whether Mid Penn Bancorp's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
We've discovered 2 warning signs about Mid Penn Bancorp. View them for free.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Mid Penn Bancorp paying out a modest 28% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
See our latest analysis for Mid Penn Bancorp
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Mid Penn Bancorp earnings per share are up 4.8% per annum over the last five years.
Mid Penn Bancorp also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Mid Penn Bancorp has delivered 7.2% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.