MetroCity Bankshares (NASDAQ:MCBS) Is Paying Out A Larger Dividend Than Last Year

The board of MetroCity Bankshares, Inc. (NASDAQ:MCBS) has announced that it will be increasing its dividend by 50% on the 11th of February to US$0.15. This makes the dividend yield about the same as the industry average at 2.0%.

Check out our latest analysis for MetroCity Bankshares

MetroCity Bankshares' Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, MetroCity Bankshares was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 27.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

MetroCity Bankshares Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from US$0.12 in 2017 to the most recent annual payment of US$0.46. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. 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 Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. MetroCity Bankshares has impressed us by growing EPS at 7.7% per year over the past three years. MetroCity Bankshares definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On MetroCity Bankshares' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for MetroCity Bankshares that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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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.