Macatawa Bank (NASDAQ:MCBC) Is Paying Out A Dividend Of $0.08

Macatawa Bank Corporation's (NASDAQ:MCBC) investors are due to receive a payment of $0.08 per share on 30th of August. This means the dividend yield will be fairly typical at 3.2%.

View our latest analysis for Macatawa Bank

Macatawa Bank's Payment Expected To Have Solid Earnings Coverage

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

Having paid out dividends for 9 years, Macatawa Bank has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Macatawa Bank's payout ratio sits at 25%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to fall by 5.2% over the next year. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 30%, which would be comfortable for the company to continue in the future.

Macatawa Bank Is Still Building Its Track Record

It is great to see that Macatawa Bank has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the dividend has gone from $0.08 total annually to $0.32. This means that it has been growing its distributions at 17% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Macatawa Bank has been growing its earnings per share at 18% a year over the past five years. 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. 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 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Macatawa Bank (1 is potentially serious!) that you should be aware of before investing. 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.