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Merchants Bancorp's (NASDAQ:MBIN) investors are due to receive a payment of $0.08 per share on 2nd of January. Based on this payment, the dividend yield will be 1.0%, which is fairly typical for the industry.
See our latest analysis for Merchants Bancorp
Merchants Bancorp's Payment Expected To Have Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.
Merchants Bancorp has established itself as a dividend paying company, given its 6-year history of distributing earnings to shareholders. Using data from its latest earnings report, Merchants Bancorp's payout ratio sits at 6.0%, an extremely comfortable number that shows that it can pay its dividend.
EPS is set to fall by 0.8% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 7.4% over the same time period, which we think the company can easily maintain.
Merchants Bancorp Doesn't Have A Long Payment History
Merchants 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. Since 2017, the annual payment back then was $0.133, compared to the most recent full-year payment of $0.32. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
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 seen EPS rising for the last five years, at 28% per annum. 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 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Merchants Bancorp you should be aware of, and 1 of them makes us a bit uncomfortable. Is Merchants Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.