Richmond Mutual Bancorporation (NASDAQ:RMBI) Is Increasing Its Dividend To US$0.10

Richmond Mutual Bancorporation, Inc.'s (NASDAQ:RMBI) dividend will be increasing to US$0.10 on 17th of March. This will take the dividend yield from 1.7% to 4.8%, providing a nice boost to shareholder returns.

View our latest analysis for Richmond Mutual Bancorporation

Richmond Mutual Bancorporation's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Richmond Mutual Bancorporation was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 20.2% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 75%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Richmond Mutual Bancorporation Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2020, the dividend has gone from US$0.20 to US$0.28. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown by 20% in the last year. We always like to see growing earnings, and if the trend continues it would be a very positive sign for the dividend potential. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

Richmond Mutual Bancorporation Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Richmond Mutual Bancorporation that investors should take into consideration. Is Richmond Mutual Bancorporation not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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