Mid Penn Bancorp (NASDAQ:MPB) Has Announced A Dividend Of $0.20

Mid Penn Bancorp, Inc.'s (NASDAQ:MPB) investors are due to receive a payment of $0.20 per share on 18th of February. This means that the annual payment will be 2.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Mid Penn Bancorp

Mid Penn Bancorp's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, Mid Penn Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 27%, which means that Mid Penn Bancorp would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 10.9%. Analysts forecast the future payout ratio could be 25% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.40 in 2015, and the most recent fiscal year payment was $0.80. This means that it has been growing its distributions at 7.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Mid Penn Bancorp has only grown its earnings per share at 3.4% per annum over the past five years. If Mid Penn Bancorp is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

An additional note is that the company has been raising capital by issuing stock equal to 17% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Mid Penn Bancorp that you should be aware of before investing. Is Mid Penn Bancorp 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.