Meridian (NASDAQ:MRBK) Will Pay A Dividend Of $0.20

The board of Meridian Corporation (NASDAQ:MRBK) has announced that it will pay a dividend on the 21st of November, with investors receiving $0.20 per share. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.

Check out the opportunities and risks within the US Banks industry.

Meridian's Earnings Will Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Meridian has a short history of paying out dividends, with its current track record at only 2 years. Based on its last earnings report however, the payout ratio is at a comfortable 19%, meaning that Meridian may be able to sustain this dividend for future years if it continues on this earnings trend.

The next 3 years are set to see EPS grow by 16.6%. The future payout ratio could be 23% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Meridian Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 2 years was $0.50 in 2020, and the most recent fiscal year payment was $1.80. This implies that the company grew its distributions at a yearly rate of about 90% over that duration. 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Meridian has impressed us by growing EPS at 53% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Meridian Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For example, we've picked out 1 warning sign for Meridian that investors should know about before committing capital to this stock. Is Meridian 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.