Mid Penn Bancorp, Inc.'s (NASDAQ:MPB) investors are due to receive a payment of $0.20 per share on 26th of August. This payment means that the dividend yield will be 2.8%, which is around the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Mid Penn Bancorp's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Mid Penn Bancorp

Mid Penn Bancorp's Earnings Will Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

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

Looking forward, earnings per share is forecast to rise by 3.2% over the next year. Assuming the dividend continues along recent trends, we think the future payout ratio could be 31% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.20 in 2014 to the most recent total annual payment of $0.80. This means that it has been growing its distributions at 15% per annum over that time. Mid Penn Bancorp has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Mid Penn Bancorp's Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Mid Penn Bancorp has grown earnings per share at 8.3% per year over the past five years. Mid Penn Bancorp definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Mid Penn Bancorp Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Mid Penn Bancorp might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. As an example, we've identified 1 warning sign for Mid Penn Bancorp that you should be aware of before investing. Is Mid Penn Bancorp not quite the opportunity you were looking for? Why not check out our selection of top 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.

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