Richmond Mutual Bancorporation (NASDAQ:RMBI) Has Announced A Dividend Of $0.14

The board of Richmond Mutual Bancorporation, Inc. (NASDAQ:RMBI) has announced that it will pay a dividend on the 13th of June, with investors receiving $0.14 per share. Based on this payment, the dividend yield on the company's stock will be 4.7%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Richmond Mutual Bancorporation

Richmond Mutual Bancorporation's Earnings Will Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Richmond Mutual Bancorporation is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Taking data from Richmond Mutual Bancorporation's last earnings report, the payout ratio is at a decent 64%, meaning that the company is able to pay out its dividend with some room to spare.

EPS is set to grow by 1.8% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio could reach 87%, which is on the higher side, but certainly still feasible.

Richmond Mutual Bancorporation Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 4 years was $0.20 in 2020, and the most recent fiscal year payment was $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Richmond Mutual Bancorporation 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.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Although it's important to note that Richmond Mutual Bancorporation's earnings per share has basically not grown from where it was three years ago, which could erode the purchasing power of the dividend over time. Growth of 1.8% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Richmond Mutual Bancorporation's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Richmond Mutual Bancorporation is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Richmond Mutual Bancorporation is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Richmond Mutual Bancorporation that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.