Why You Might Be Interested In Meridian Corporation (NASDAQ:MRBK) For Its Upcoming Dividend

Readers hoping to buy Meridian Corporation (NASDAQ:MRBK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Meridian investors that purchase the stock on or after the 12th of August will not receive the dividend, which will be paid on the 19th of August.

The company's next dividend payment will be US$0.125 per share, on the back of last year when the company paid a total of US$0.50 to shareholders. Last year's total dividend payments show that Meridian has a trailing yield of 4.5% on the current share price of US$11.16. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Meridian can afford its dividend, and if the dividend could grow.

View our latest analysis for Meridian

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Meridian is paying out an acceptable 52% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Meridian earnings per share are up 8.2% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, Meridian has lifted its dividend by approximately 19% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Meridian worth buying for its dividend? Meridian has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.

However if you're still interested in Meridian as a potential investment, you should definitely consider some of the risks involved with Meridian. To help with this, we've discovered 2 warning signs for Meridian that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.