Mid Penn Bancorp, Inc. (NASDAQ:MPB) has announced that it will pay a dividend of $0.20 per share on the 20th of February. Based on this payment, the dividend yield will be 2.6%, which is fairly typical for the industry.
See our latest analysis for Mid Penn Bancorp
Mid Penn Bancorp's Payment Expected To Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
Mid Penn Bancorp has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Using data from its latest earnings report, Mid Penn Bancorp's payout ratio sits at 23%, an extremely comfortable number that shows that it can pay its dividend.
Over the next 3 years, EPS is forecast to expand by 39.4%. Analysts estimate the future payout ratio will be 19% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.20 in 2013 to the most recent total annual payment of $0.80. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Mid Penn Bancorp has been growing its earnings per share at 16% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
Mid Penn Bancorp Looks Like A Great Dividend Stock
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Mid Penn Bancorp that investors should know about before committing capital to this stock. Is Mid Penn 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.
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