Merchants Bancorp (NASDAQ:MBIN) Has Announced That It Will Be Increasing Its Dividend To $0.08

The board of Merchants Bancorp (NASDAQ:MBIN) has announced that the dividend on 3rd of April will be increased to $0.08, which will be 14% higher than last year's payment of $0.07 which covered the same period. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

View our latest analysis for Merchants Bancorp

Merchants Bancorp's Earnings Will Easily Cover The Distributions

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

Having paid out dividends for 5 years, Merchants Bancorp has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Merchants Bancorp's payout ratio sits at 6.2%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to expand by 11.0%. The future payout ratio could be 6.6% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Merchants Bancorp Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 5 years was $0.133 in 2018, and the most recent fiscal year payment was $0.28. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Merchants Bancorp has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Merchants Bancorp has impressed us by growing EPS at 24% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Merchants Bancorp's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Now, if you want to look closer, it would be worth checking out our free research on Merchants Bancorp management tenure, salary, and performance. 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.