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The board of Mid Penn Bancorp, Inc. (NASDAQ:MPB) has announced that it will pay a dividend on the 26th of May, with investors receiving $0.20 per share. Based on this payment, the dividend yield will be 2.9%, which is fairly typical for the industry.

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Mid Penn Bancorp's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Mid Penn Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Mid Penn Bancorp's last earnings report, the payout ratio is at a decent 28%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 0.9%. Assuming the dividend continues along recent trends, we think the future payout ratio could be 32% by next year, which is in a pretty sustainable range.

See our latest analysis for Mid Penn Bancorp

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was $0.40, compared to the most recent full-year payment of $0.80. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Mid Penn Bancorp Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Mid Penn Bancorp has grown earnings per share at 5.1% per year over the past five years. Mid Penn Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

An additional note is that the company has been raising capital by issuing stock equal to 17% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Mid Penn Bancorp's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.