Midland States Bancorp, Inc. (NASDAQ:MSBI) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 15th of August will not receive this dividend, which will be paid on the 23rd of August.
Midland States Bancorp’s next dividend payment will be US$0.24 per share, on the back of last year when the company paid a total of US$0.97 to shareholders. Calculating the last year’s worth of payments shows that Midland States Bancorp has a trailing yield of 3.7% on the current share price of $26.03. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it’s growing.
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. Midland States Bancorp paid out a comfortable 41% of its profit last year.
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.
Have Earnings And Dividends Been Growing?
Companies that aren’t growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not enthused to see that Midland States Bancorp’s earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. In the last 3 years, Midland States Bancorp has lifted its dividend by approximately 10% a year on average.
The Bottom Line
Is Midland States Bancorp an attractive dividend stock, or better left on the shelf? Earnings per share have been flat in recent years, although Midland States Bancorp reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Midland States Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Curious what other investors think of Midland States Bancorp? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow .
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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