In This Article:
Mercantile Bank Corporation (NASDAQ:MBWM) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of September to $0.32. This makes the dividend yield 3.7%, which is above the industry average.
Check out our latest analysis for Mercantile Bank
Mercantile Bank's Payment Expected To Have Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Having distributed dividends for at least 10 years, Mercantile Bank has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 39%, which means that Mercantile Bank would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, earnings per share is forecast to rise by 16.6% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 38% by next year, which is in a pretty sustainable range.
Mercantile Bank Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.36 in 2012, and the most recent fiscal year payment was $1.24. This means that it has been growing its distributions at 13% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Mercantile Bank has grown earnings per share at 11% per year over the past five years. Mercantile Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Mercantile Bank's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for Mercantile Bank for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.