Mercantile Bank's (NASDAQ:MBWM) Dividend Will Be Increased To $0.36

The board of Mercantile Bank Corporation (NASDAQ:MBWM) has announced that it will be paying its dividend of $0.36 on the 18th of September, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 3.4%, which is fairly typical for the industry.

See our latest analysis for Mercantile Bank

Mercantile Bank's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Mercantile Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Mercantile Bank's last earnings report, the payout ratio is at a decent 27%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 8.3% over the next 12 months. But if the dividend continues along recent trends, we estimate the future payout ratio could be 34%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

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 $0.48 in 2014, and the most recent fiscal year payment was $1.44. This means that it has been growing its distributions at 12% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Mercantile Bank has impressed us by growing EPS at 13% per year over the past five years. 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Mercantile Bank you should be aware of, and 1 of them is concerning. Is Mercantile Bank 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.