Meridian (NASDAQ:MRBK) Will Pay A Dividend Of $0.125

Meridian Corporation (NASDAQ:MRBK) has announced that it will pay a dividend of $0.125 per share on the 19th of November. This means that the annual payment will be 3.7% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Meridian

Meridian's Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Meridian has a short history of paying out dividends, with its current track record at only 4 years. Based on Meridian's last earnings report, calculating for its payout ratio equates to 49%, which means that the company covered its last dividend with comfortable room to spare.

Over the next year, EPS is forecast to expand by 44.3%. If the dividend continues on this path, the future payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Meridian Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the dividend has gone from $0.25 total annually to $0.50. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Meridian has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Meridian Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Meridian has seen EPS rising for the last five years, at 5.9% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, we think Meridian is a solid choice as a dividend stock, even though the dividend wasn't raised this year. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Meridian that investors need to be conscious of moving forward. Is Meridian not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.