Mid Penn Bancorp dividend: $0.23 payout well covered by Q3 earnings

By Julia Santos · Founding Editor, DividendsTimes

Educational analysis, not personalized investment advice.

Mid Penn Bancorp (MPB) is keeping its dividend at $0.23 per common share for the quarter, and the third-quarter earnings behind it make that payout look timid. In its earnings release, the company reported net income available to common shareholders of $21.6 million, or $0.85 per basic share and $0.84 per diluted share. Nasdaq Dividends carried the announcement. If you own a Pennsylvania regional bank for the check and not for the growth, the question that matters is how much cushion sits between earnings and that $0.23.

The payout math on the Mid Penn Bancorp dividend

Start with the simplest test. Take the company’s reported diluted EPS of $0.84 and set the $0.23 dividend against it. The payout ratio comes out at a bit over a quarter of earnings, and basic EPS of $0.85 gives nearly the same answer. Flip it around and the quarter’s earnings covered the dividend several times over, close to four. Those ratios are our own calculation from the company’s figures. Mid Penn did not publish them.

Cash is the second angle. Divide the $21.6 million of net income by the $0.85 basic EPS and you get a rough share count, which is a back-of-the-envelope estimate on our part and not a reported number. Multiply that count by $0.23 and you have the approximate cost of the common dividend for the quarter. Subtract it from the $21.6 million and most of the quarter’s profit is left over. That is what the bank keeps to support loan growth, build capital or absorb credit losses.

I read this as a retained-earnings story with a small dividend attached. The bank is choosing to plow most of what it earns back into the balance sheet, and the low payout ratio is the visible result of that choice. Whether you like it depends on what you want from the stock. I think it is the right call for a regional lender of this size, because a bank that pays out most of a good quarter has nothing left for the bad one.

What the yield looks like

The release gives a quarterly rate, so annualizing is easy: multiply $0.23 by four and you have the yearly payout per share, assuming the board holds the rate. I am not quoting a yield, because it depends on the price you pay, and a figure that is hours old can mislead. Pull a live quote, divide the annual payout by it, and do that before you compare MPB with a long-dated Treasury or a bank ETF.

Here is how to read what you get. A low payout ratio usually comes with a modest starting yield. If your number lands below what a broad regional bank fund distributes, you are being paid for growth and for the safety margin, not for today’s check. If it lands above, ask why the market wants extra yield, and look at the loan book before you call it a bargain.

What it means for regional bank dividend investors

First, the dividend looks safe on these numbers. Earnings that cover the payout several times over leave room for a real rise in credit costs before the $0.23 is in danger. It would take a large swing in provisions, or a sharp squeeze on net interest margin, to push the payout ratio anywhere near the level of total earnings.

Second, the real threat to regional bank holders is seldom the dividend in a good quarter. It is the quarter when commercial real estate or construction loans go bad, deposits cost more than expected, or regulators ask for more capital. This coverage buffers against all of that, but it is one quarter. One quarter does not show whether earnings are stable.

Third, a low ratio leaves room to raise the dividend. If earnings hold near $0.84 a share, the board could lift the payout by a meaningful amount and still keep the ratio well under half of earnings. I cannot tell you whether it will, and the release makes no promise. But the arithmetic is not the obstacle, which is more than you can say for banks that already pay out half or more of what they make.

Fourth, look at what the headline leaves out. The full filing will show net interest margin, the allowance for credit losses as a share of loans, nonperforming assets and the capital ratios. A strong income number sitting on a thin allowance is weaker than it looks. One-time gains can also flatter a quarter, so check whether the $21.6 million includes anything unusual.

Fifth, if you hold MPB in a retirement account and reinvest the dividends, the small per-share amount matters less than the share count compounding over time. A bank that keeps most of its earnings and grows book value can pay more total income years down the road than one that starts higher and stalls.

What to watch

• The ex-dividend and payment dates. They are in the company’s release and in the 8-K. Confirm them before you buy or sell near the record date.
• Diluted EPS next quarter. If it falls to roughly double the dividend, the $0.23 payout would take half of earnings. That is our own threshold for when to start asking questions, not a company policy.
• Credit quality in the 10-Q. Rising nonperforming loans or a sudden jump in provisions would matter more than any single earnings headline.
• Any change in the dividend rate. A raise would show the board sees these earnings as durable. A flat rate for several quarters would suggest it would rather build capital.

Frequently asked questions

Is the Mid Penn Bancorp dividend safe?

On the reported numbers, it looks well covered. The $0.23 quarterly payout is a bit over a quarter of the $0.84 diluted EPS in the company’s release, by our calculation. Safety also turns on credit quality and capital, and you can only judge those from the full filing.

What is the annual dividend per share?

If the board keeps the current quarterly rate, the yearly total is four times $0.23. That is a simple annualization and not a promise. The board can change the rate at any meeting.

How do I work out the yield?

Multiply the quarterly dividend by four, divide by the current share price and multiply by 100. Use a live quote, because the result moves every time the stock does.

Educational analysis, not personalized investment advice.