Last update on 2024-06-27

Macatawa Bank (MCBC) - Dividend Analysis (Final Score: 6/8)

Analysis of Macatawa Bank's (MCBC) dividend policy with a 6/8 final score. Evaluation based on 8-criteria method. Learn about yield, growth, and stability.

Short Analysis - Dividend Score: 6

We're running Macatawa Bank (MCBC) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

dividend yield and why it is important to consider

Macatawa Bank's current dividend yield of 2.9255% being higher than the industry average of 2.76% can be seen as a positive indicator for potential investors. Historically, analyzing the bank's dividend yield over the past 20 years, there's notable volatility, particularly in the years following 2008. The yield went to 7.4928% in 2008, followed by no dividends paid from 2009 to 2012. The rebound started in 2014 at 1.4706%, gradually increasing to stabilize around the 3% mark recently. Year 2020 marked a significant peak of 3.8232%. This trend signifies resilience and an ability to offer competitive returns. In conclusion, the current trend of a higher-than-industry average dividend yield appears positive, indicating a good return for investors while showing recovery and stability.

Average annual Growth Rate higher than 5% in the last 20 years?

Explain the criterion for Macatawa Bank (MCBC) and why it is important to consider

The criterion checks if the Dividend Growth Rate is higher than 5% over the last 20 years. The importance of this measure is rooted in its ability to indicate the company's profitability, reliability, and shareholder value. _OTHER INFORMATION._

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio is calculated by dividing the total dividends per share by the earnings per share over a given period, and it is important as it shows a company's commitment to returning profits to shareholders while retaining enough to fund operations and growth.

The payout ratio over the last 20 years for Macatawa Bank is 23.92%. This includes periods where the payout ratio was zero, indicative of potential financial stress or profit reinvestment phases, and a significantly high value (above 90%) in 2007 indicating potential inconsistency. The consistently low-average payout trend suggests a conservative approach towards dividend distribution which ensures sustainability, thus good for long-term investors. However, fluctuations especially in 2007 and during negative payout years like 2008 need to be scrutinized further.

Dividends Well Covered by Earnings?

Dividends are well covered by earnings when the company generates sufficient profits to pay out sustainable dividends. This ensures financial stability and demonstrates the company's profitability.

Examining Macatawa Bank's historical data, the coverage fluctuated significantly, especially during 2008-2011 when earnings were negative and no dividends were paid. From 2003 to 2007, the coverage ratios were reasonable though gradually increasing. Post-financial crisis, the bank restored dividend payouts in 2014. Coverage remained positive and relatively stable from 2012 onward; such consistent coverage indicates good financial health and prudent dividend policy. For instance, in 2022, the coverage ratio was 0.315, which, while modest, still shows appropriate earnings management compared to the payout.

Dividends Well Covered by Cash Flow?

One essential criterion when analyzing dividend stocks is evaluating if dividends are well covered by the company's free cash flow.

The free cash flow (FCF) consistently increased from $14.71M in 2003 to $43.36M in 2023. Conversely, the dividend payout experienced temporary halts from 2010 to 2012 but resumed thereafter, with steady increases to $11.28M in 2023. The dividend coverage ratio by FCF ranged from as low as 0% during the halt to a high of 0.5345 in 2006. More recently, the ratio hovers around 0.26-0.38, indicating that while FCF covers more than a quarter of the dividend payout, overall coverage could still be improved. This trend shows strengthened cash flow over the years but suggests cautious optimism as the ratio isn't overwhelmingly strong in favor of covering the dividends.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years indicate a company's consistent performance and reliability, essential for income-seeking investors.

Reviewing Macatawa Bank's (MCBC) dividend per share data over the past 20 years reveals significant volatility during the 2008 financial crisis. The dividends dropped from $0.5138 in 2007 to zero between 2009 and 2011. This considerable drop identifies 2008 as the year where dividends decreased significantly, violating the criterion for stability. Moreover, the lack of dividends for those three years is a major red flag for income-seeking investors looking for consistency. After 2012, the dividends appear to show a gradual recovery, culminating at $0.33 in 2023. While Macatawa Bank demonstrates recent recovery and slight year-over-year increases post-2012, the drastic drops in the late 2000s indicate that the bank hasn't consistently adhered to the stability shoppers for income require.

Dividends Paid for Over 25 Years?

Evaluate if a company has consistently paid dividends for over 25 years and its significance.

Macatawa Bank (MCBC) paid dividends for several consecutive years from 2000 to 2009. The company then had a span of skipping dividends between 2010 and 2015 and resumed payments in 2016. This means that while dividends were not distributed for a full 25-year span, resuming payments could demonstrate recovery or strategic choice. Consistent dividend-paying for over 25 years typically indicates a company's sustained financial health; however, the break in payout between 2010 and 2015 is a negative indicator for long-term consistency. Investors seeking reliable dividends might be cautious, noting MCBC's inconsistency in dividend distribution over the evaluated timeframe.

Reliable Stock Repurchases Over the Past 20 Years?

Stock repurchases occur when a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This can be a useful indicator of the company's financial health and management's confidence in the company's future.

By examining the number of shares for Macatawa Bank (MCBC) over the past 20 years, we can see fluctuations rather than a consistent decrease in the number of shares outstanding. Specifically, reliable stock repurchases are noted in 2007, 2008, and 2023. The average change in the number of shares being -1.0881 suggests that the company has slightly reduced its number of shares overall, though not consistently. However, the total share count shows significant variability, with notable increases in 2009, 2010, and 2013. For example, the number of shares increased from 22,739,990 in 2011 to a peak of 34,872,050 in 2013, which implies that besides buybacks, the company has also issued new shares during this period. This mixed activity on share repurchase reflects neither particularly positively nor negatively on its own, but it indicates that the company's strategy towards share repurchases is not straightforward or particularly consistent. While sporadic buybacks might signal management's occasional confidence in the company's stock being undervalued, the increases in share count could be viewed unfavorably by investors looking for a steady return through reduced dilution.