MetroCity Bankshares, Inc. (NASDAQ:MCBS) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see MetroCity Bankshares, Inc. (NASDAQ:MCBS) is about to trade ex-dividend in the next four 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. Thus, you can purchase MetroCity Bankshares' shares before the 30th of January in order to receive the dividend, which the company will pay on the 9th of February.

The company's next dividend payment will be US$0.20 per share. Last year, in total, the company distributed US$0.72 to shareholders. Based on the last year's worth of payments, MetroCity Bankshares stock has a trailing yield of around 3.0% on the current share price of US$24.26. If you buy this business for its dividend, you should have an idea of whether MetroCity Bankshares's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See 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. Fortunately MetroCity Bankshares's payout ratio is modest, at just 35% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit MetroCity Bankshares paid out over the last 12 months.

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Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at MetroCity Bankshares, with earnings per share up 3.7% on average over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past eight years, MetroCity Bankshares has increased its dividend at approximately 25% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is MetroCity Bankshares worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating MetroCity Bankshares more closely.

While it's tempting to invest in MetroCity Bankshares for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for MetroCity Bankshares you should know about.

If you're in the market for strong dividend payers, we recommend checking 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.