Middlefield Banc (NASDAQ:MBCN) Is Paying Out A Larger Dividend Than Last Year

Middlefield Banc Corp. (NASDAQ:MBCN) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of December to $0.30. Despite this raise, the dividend yield of 2.3% is only a modest boost to shareholder returns.

Our analysis indicates that MBCN is potentially undervalued!

Middlefield Banc's Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Middlefield Banc has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 23% also shows that Middlefield Banc is able to comfortably pay dividends.

EPS is set to fall by 4.2% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 28% over the same time period, which is in a pretty comfortable range.

Middlefield Banc Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the annual payment back then was $0.52, compared to the most recent full-year payment of $0.68. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Middlefield Banc has been growing its earnings per share at 13% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Middlefield Banc's prospects of growing its dividend payments in the future.

Middlefield Banc Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Middlefield Banc is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Middlefield Banc stock. Is Middlefield Banc not quite the opportunity you were looking for? Why not check out our selection of top 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.