Midland States Bancorp's (NASDAQ:MSBI) Shareholders Will Receive A Bigger Dividend Than Last Year

Midland States Bancorp, Inc.'s (NASDAQ:MSBI) dividend will be increasing to US$0.29 on 18th of February. This makes the dividend yield 3.8%, which is above the industry average.

See our latest analysis for Midland States Bancorp

Midland States Bancorp's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Midland States Bancorp was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 16.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Midland States Bancorp Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the first annual payment was US$0.72, compared to the most recent full-year payment of US$1.16. This means that it has been growing its distributions at 8.3% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Midland States Bancorp to be a consistent dividend paying stock.

Midland States Bancorp Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Midland States Bancorp has impressed us by growing EPS at 7.5% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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 Midland States 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 performing dividend stock.

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