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The board of MainStreet Bancshares, Inc. (NASDAQ:MNSB) has announced that it will pay a dividend of $0.10 per share on the 19th of November. This payment means the dividend yield will be 2.3%, which is below the average for the industry.
See our latest analysis for MainStreet Bancshares
MainStreet Bancshares' Earnings Will Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive.
MainStreet Bancshares has a short history of paying out dividends, with its current track record at only 3 years. Based on its last earnings report however, the payout ratio is at a comfortable 8.3%, meaning that MainStreet Bancshares may be able to sustain this dividend for future years if it continues on this earnings trend.
The next 3 years are set to see EPS grow by 8.6%. Analysts forecast the future payout ratio could be 36% over the same time horizon, which is a number we think the company can maintain.
MainStreet Bancshares Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.20 in 2021 to the most recent total annual payment of $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Dividend Growth Is Doubtful
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. MainStreet Bancshares has seen earnings per share falling at 6.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While MainStreet Bancshares is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for MainStreet Bancshares that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.