Mid Penn Bancorp (NASDAQ:MPB) Will Pay 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 22nd of August. This means the dividend yield will be fairly typical at 2.8%.

View our latest analysis for Mid Penn Bancorp

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

We aren't too impressed by dividend yields unless they can be sustained over time.

Mid Penn Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Mid Penn Bancorp's last earnings report, the payout ratio is at a decent 34%, 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 24.9% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 33% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from $0.20 total annually to $0.80. This means that it has been growing its distributions at 15% per annum over that time. Mid Penn Bancorp has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Mid Penn Bancorp's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Mid Penn Bancorp has the option to increase the payout ratio to return more cash to shareholders.

An additional note is that the company has been raising capital by issuing stock equal to 39% 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.

Our Thoughts On Mid Penn Bancorp's Dividend

Overall, we think Mid Penn Bancorp is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Mid Penn Bancorp that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.