Meridian (NASDAQ:MRBK) Has Affirmed Its Dividend Of $0.125

Meridian Corporation (NASDAQ:MRBK) will pay a dividend of $0.125 on the 20th of May. This makes the dividend yield 5.7%, which will augment investor returns quite nicely.

View our latest analysis for Meridian

Meridian's Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Meridian is just starting to establish itself as being able to pay dividends to shareholders, given its short 4-year history of distributing earnings. Diving into the company's earnings report, the payout ratio is set at 35%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.

The next year is set to see EPS grow by 23.4%. If the dividend continues on this path, the future payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Meridian Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The annual payment during the last 4 years was $0.25 in 2020, and the most recent fiscal year payment was $0.50. This means that it has been growing its distributions at 19% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

We Could See Meridian's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Meridian has seen EPS rising for the last five years, at 8.9% per annum. 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 Meridian's Dividend

Overall, we like to see the dividend staying consistent, and we think Meridian might even raise payments in the future. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Meridian that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.