Mercantile Bank Corporation (NASDAQ:MBWM) will increase its dividend from last year's comparable payment on the 17th of September to $0.38. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

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Mercantile Bank's Payment Expected To Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Mercantile Bank has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Mercantile Bank's payout ratio of 29% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 10.3% over the next 3 years. The future payout ratio could be 28% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

See our latest analysis for Mercantile Bank

Mercantile Bank Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.48 in 2015 to the most recent total annual payment of $1.48. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Mercantile Bank has impressed us by growing EPS at 13% per 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.

We Really Like Mercantile Bank's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Mercantile Bank for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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