Merchants Bancorp (NASDAQ:MBIN) Will Pay A Larger Dividend Than Last Year At $0.09

Merchants Bancorp (NASDAQ:MBIN) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of April to $0.09. This takes the annual payment to 0.8% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Merchants Bancorp

Merchants Bancorp's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 6 years, Merchants Bancorp has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Merchants Bancorp's payout ratio sits at 5.7%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 0.8%. Analysts forecast the future payout ratio could be 7.0% over the same time horizon, which is a number we think the company can maintain.

Merchants Bancorp Is Still Building Its Track Record

It is great to see that Merchants Bancorp has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of $0.133 in 2018 to the most recent total annual payment of $0.36. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Merchants Bancorp has impressed us by growing EPS at 33% per year over the past five years. 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.

Merchants Bancorp Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Merchants Bancorp is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Are management backing themselves to deliver performance? Check their shareholdings in Merchants Bancorp in our latest insider ownership analysis. 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.