The board of Midland States Bancorp, Inc. (NASDAQ:MSBI) has announced that it will pay a dividend of $0.31 per share on the 21st of February. Based on this payment, the dividend yield on the company's stock will be 6.3%, which is an attractive boost to shareholder returns.

See our latest analysis for Midland States Bancorp

Midland States Bancorp's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having paid out dividends for 9 years, Midland States Bancorp has a good history of paying out a part of its earnings to shareholders. Past distributions unfortunately do not guarantee future ones, and Midland States Bancorp's last earnings report actually showed that the company went over its net earnings in its total dividend distribution. This is an alarming sign for the sustainability of its dividends, as it may mean that Midland States Bancorpis pulling cash from elsewhere to keep its shareholders happy.

According to analysts, EPS should be several times higher in the next 3 years. In addtion, they also estimate the future payout ratio could reach 46% in the same time period, which we would be comfortable to see continuing.

Midland States Bancorp Doesn't Have A Long Payment History

Midland States Bancorp's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of $0.72 in 2016 to the most recent total annual payment of $1.24. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Midland States Bancorp May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.7% per annum over the last five years, which admittedly is a bit slow. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for Midland States Bancorp's dividend in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Midland States Bancorp's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Midland States Bancorp that investors should take into consideration. 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.