MetroCity Bankshares (NASDAQ:MCBS) Will Pay A Larger Dividend Than Last Year At $0.23

MetroCity Bankshares, Inc. (NASDAQ:MCBS) will increase its dividend from last year's comparable payment on the 8th of November to $0.23. Even though the dividend went up, the yield is still quite low at only 2.5%.

See our latest analysis for MetroCity Bankshares

MetroCity Bankshares' Earnings Will Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 8 years, MetroCity Bankshares has a good history of paying out a part of its earnings to shareholders. Based on MetroCity Bankshares' last earnings report, the payout ratio is at a decent 33%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, earnings per share is forecast to rise by 7.3% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 38% by next year, which is in a pretty sustainable range.

MetroCity Bankshares Is Still Building Its Track Record

MetroCity Bankshares' 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 annual payment during the last 8 years was $0.12 in 2016, and the most recent fiscal year payment was $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year 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.

We Could See MetroCity Bankshares' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. MetroCity Bankshares has impressed us by growing EPS at 5.4% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for MetroCity Bankshares' prospects of growing its dividend payments in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 picked out 2 warning signs for MetroCity Bankshares that investors should know about before committing capital to this stock. Is MetroCity Bankshares 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.