MidWestOne Financial Group's (NASDAQ:MOFG) Shareholders Will Receive A Bigger Dividend Than Last Year

MidWestOne Financial Group, Inc.'s (NASDAQ:MOFG) dividend will be increasing from last year's payment of the same period to $0.2425 on 15th of June. This will take the annual payment to 4.9% of the stock price, which is above what most companies in the industry pay.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. MidWestOne Financial Group's stock price has reduced by 36% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

View our latest analysis for MidWestOne Financial Group

MidWestOne Financial Group's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, MidWestOne Financial Group has a long history of paying out a part of its earnings to shareholders. Based on MidWestOne Financial Group's last earnings report, the payout ratio is at a decent 31%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 8.0%. If the dividend continues along recent trends, we estimate the future payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

MidWestOne Financial Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.38 in 2013 to the most recent total annual payment of $0.97. This implies that the company grew its distributions at a yearly rate of about 9.8% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. It's encouraging to see that MidWestOne Financial Group has been growing its earnings per share at 14% a year over the past five years. MidWestOne Financial Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

MidWestOne Financial Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for MidWestOne Financial Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.