Mercantile Bank (NASDAQ:MBWM) Is Increasing Its Dividend To $0.33

Mercantile Bank Corporation (NASDAQ:MBWM) will increase its dividend from last year's comparable payment on the 15th of March to $0.33. This will take the dividend yield to an attractive 4.0%, providing a nice boost to shareholder returns.

See our latest analysis for Mercantile Bank

Mercantile Bank's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Mercantile Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Mercantile Bank's payout ratio of 33% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 14.0% over the next 3 years. Analysts forecast the future payout ratio could be 33% over the same time horizon, which is a number we think the company can maintain.

Mercantile Bank Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.36 in 2013, and the most recent fiscal year payment was $1.32. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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

Investors could be attracted to the stock based on the quality of its payment history. Mercantile Bank has seen EPS rising for the last five years, at 15% per annum. 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, a dividend increase is always good, and we think that Mercantile Bank is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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.

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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.