Macatawa Bank (NASDAQ:MCBC) Has Announced A Dividend Of US$0.08

By
Simply Wall St
Published
July 28, 2021
NasdaqGS:MCBC
Source: Shutterstock

The board of Macatawa Bank Corporation (NASDAQ:MCBC) has announced that it will pay a dividend of US$0.08 per share on the 26th of August. The dividend yield will be 3.8% based on this payment which is still above the industry average.

View our latest analysis for Macatawa Bank

Macatawa Bank's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Macatawa Bank was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to fall by 12.1%. If the dividend continues along recent trends, we estimate the payout ratio could be 48%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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NasdaqGS:MCBC Historic Dividend July 29th 2021

Macatawa Bank Is Still Building Its Track Record

Macatawa Bank's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from US$0.08 in 2014 to the most recent annual payment of US$0.32. This means that it has been growing its distributions at 22% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

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. Macatawa Bank has seen EPS rising for the last five years, at 18% per annum. Macatawa 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 Macatawa Bank's Dividend

Overall, we like to see the dividend staying consistent, and we think Macatawa Bank might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Macatawa Bank has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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