Meridian Corporation (NASDAQ:MRBK) Looks Interesting, And It's About To Pay A Dividend
It looks like Meridian Corporation (NASDAQ:MRBK) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Meridian's shares before the 12th of August in order to be eligible for the dividend, which will be paid on the 22nd of August.
The company's next dividend payment will be US$0.20 per share, on the back of last year when the company paid a total of US$1.80 to shareholders. Based on the last year's worth of payments, Meridian has a trailing yield of 6.3% on the current stock price of $28.75. If you buy this business for its dividend, you should have an idea of whether Meridian's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Meridian
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Meridian is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Meridian's earnings have been skyrocketing, up 34% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last two years, Meridian has lifted its dividend by approximately 90% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Meridian worth buying for its dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Meridian ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for Meridian you should be aware of.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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.
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