MetroCity Bankshares, Inc. (NASDAQ:MCBS)'s Could Be A Buy For Its Upcoming Dividend
It looks like MetroCity Bankshares, Inc. (NASDAQ:MCBS) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 30th of January to receive the dividend, which will be paid on the 7th of February.
MetroCity Bankshares's next dividend payment will be US$0.11 per share, and in the last 12 months, the company paid a total of US$0.44 per share. Looking at the last 12 months of distributions, MetroCity Bankshares has a trailing yield of approximately 2.5% on its current stock price of $17.86. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for MetroCity Bankshares
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. MetroCity Bankshares paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. It's encouraging to see MetroCity Bankshares has grown its earnings rapidly, up 25% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last three years, MetroCity Bankshares has lifted its dividend by approximately 30% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
From a dividend perspective, should investors buy or avoid MetroCity Bankshares? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. MetroCity Bankshares 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.
Curious what other investors think of MetroCity Bankshares? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
