Here's What We Like About MetroCity Bankshares' (NASDAQ:MCBS) Upcoming Dividend

It looks like MetroCity Bankshares, Inc. (NASDAQ:MCBS) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least one business day to settle. In other words, investors can purchase MetroCity Bankshares' shares before the 30th of April in order to be eligible for the dividend, which will be paid on the 9th of May.

The company's next dividend payment will be US$0.23 per share. Last year, in total, the company distributed US$0.92 to shareholders. Based on the last year's worth of payments, MetroCity Bankshares stock has a trailing yield of around 3.3% on the current share price of US$27.60. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see MetroCity Bankshares paying out a modest 33% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

View our latest analysis for MetroCity Bankshares

Click here to see how much of its profit MetroCity Bankshares paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at MetroCity Bankshares, with earnings per share up 7.4% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. MetroCity Bankshares has delivered 25% dividend growth per year on average over the past nine years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid MetroCity Bankshares? MetroCity Bankshares has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, MetroCity Bankshares appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Want to learn more about MetroCity Bankshares's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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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.