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Merchants Bancorp (MBIN) Ups Dividend: Is the Stock Worth a Look?

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Similar to the last few years, Merchants Bancorp (MBIN - Free Report) has announced a hike in dividend. The company announced a quarterly cash dividend of 9 cents per share, representing a 12.5% increase from the prior payout. The amount will be paid out on Apr 1 to shareholders on record as of Mar 15.

Considering the last day’s closing price of $31.78, Merchants Bancorp’s dividend yield currently stands at 1.13%. This yield is not only attractive for income investors but it represents a steady income stream.

Merchants Bancorp’s robust business model highlights its commitment toward enhancing shareholders’ value with its strong cash generation capabilities. It must be noted that the bank has been increasing dividend every year since 2018. Prior to the latest revision, the company had raised its quarterly dividend to 8 cents per share in February 2020, marking a 14.3% hike.

While Merchants Bancorp stock looks promising based on regular rise in dividend, one must take a look at its fundamentals and financial performance before taking any investment decision.

Merchants Bancorp has a solid balance sheet. As of Dec 31, 2020, it had total borrowings of $1.3 billion, while its cash and cash equivalents were $179.7 million. Also, the company has significant borrowing capacity, with unused lines of credit of $2.6 billion at 2020-end. Thus, given the solid balance sheet position and earnings strength, the bank’s capital deployment activities look sustainable.

Moreover, Merchants Bancorp has solid prospects. The company has been growing organically and its revenues are expected to get support from strength in fee income sources, and strong loan and deposit balances amid lower rates and economic slowdown. For 2021, the company’s revenues are projected to grow 2.9% year over year.

Further, Merchants Bancorp’s ROE of 36.10% compared with the industry average of 8.59% highlights its commendable position over peers.

Also, the Zacks Consensus Estimate for earnings has been revised 21.5% and 12.4% upward for 2021 and 2022, respectively, over the past 30 days. At present, Merchants Bancorp carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Merchants Bancorp have gained 48.7% over the past year, significantly outperforming the industry’s 0.7% rise.



Hence, based on the above-mentioned factors, the stock seems worth a look. However, margin pressure due to near-zero interest rates remains a major concern. Also, mounting operating expenses might hurt Merchants Bancorp’s bottom line to some extent. Thus, one must consider these downsides before taking any decision.

Other Banks Taking Similar Actions

Since the beginning of 2021, several banks have announced increase in their quarterly dividends. Some of these are Bank OZK (OZK - Free Report) , Washington Federal Inc. (WAFD - Free Report) and MVB Financial Corp. (MVBF - Free Report) .

Bank OZK raised its quarterly dividend nearly 1%, while Washington Federal increased it 4.5%. Further, MVB Financial announced a 11.1% hike in its dividend.

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WaFd, Inc. (WAFD) - free report >>

Merchants Bancorp (MBIN) - free report >>

Mvb Financial Corp. (MVBF) - free report >>

Bank OZK (OZK) - free report >>

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