Midland States Bancorp's (NASDAQ:MSBI) Upcoming Dividend Will Be Larger Than Last Year's

The board of Midland States Bancorp, Inc. (NASDAQ:MSBI) has announced that it will be paying its dividend of $0.30 on the 19th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 6.1%, which is above the industry average.

See our latest analysis for Midland States Bancorp

Midland States Bancorp's Dividend Forecasted To Be Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having paid out dividends for 7 years, Midland States Bancorp has a good history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Midland States Bancorp's payout ratio of 28% is a good sign for current shareholders as this means that earnings decently cover dividends.

EPS is set to fall by 9.2% over the next 12 months. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 34%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

Midland States Bancorp Doesn't Have A Long Payment History

Midland States Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.72 in 2016 to the most recent total annual payment of $1.20. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Midland States Bancorp has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Midland States Bancorp has been growing its earnings per share at 54% a 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.

Midland States Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Midland States Bancorp is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Midland States Bancorp (of which 1 is a bit unpleasant!) you should know about. 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.