Merchants Bancorp (NASDAQ:MBIN) Will Pay A Dividend Of $0.08

The board of Merchants Bancorp (NASDAQ:MBIN) has announced that it will pay a dividend on the 2nd of October, with investors receiving $0.08 per share. This means that the annual payment will be 1.1% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Merchants Bancorp

Merchants Bancorp's Earnings Will Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Merchants Bancorp has established itself as a dividend paying company, given its 5-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 6.3% also shows that Merchants Bancorp is able to comfortably pay dividends.

Over the next year, EPS is forecast to fall by 0.2%. But if the dividend continues along recent trends, we estimate the future payout ratio could be 7.7%, which we would consider to be quite comfortable looking forward, with most of the company's earnings left over to grow the business in the future.

Merchants Bancorp Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the dividend has gone from $0.133 total annually to $0.32. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Merchants Bancorp 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Merchants Bancorp has grown earnings per share at 26% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Merchants Bancorp's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for Merchants 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 yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.