Updated 3/11/25
Merchants Bancorp (NASDAQ: MBIN) may not be the first name that comes to mind when thinking about dividend stocks, but this financial holding company has built a strong reputation in banking, mortgage warehousing, and multi-family housing lending. With a market cap of around $1.68 billion, MBIN operates in a specialized space where it has carved out a profitable niche.
For those interested in dividend stocks, MBIN presents an interesting case. While it doesn’t offer an ultra-high yield, its payout ratio is remarkably low, which suggests long-term stability and room for growth. The company also boasts strong profitability metrics, indicating that management is efficiently using resources to generate solid returns.
Let’s take a closer look at what makes this stock appealing to dividend investors.
Key Dividend Metrics
📌 Dividend Yield: 1.09%
📌 Annual Dividend Rate: $0.40 per share
📌 5-Year Average Dividend Yield: 1.04%
📌 Payout Ratio: 5.71%
📌 Dividend Growth: Consistent increases over time
📌 Ex-Dividend Date: March 14, 2025
📌 Next Dividend Payment Date: April 1, 2025
Dividend Overview
Merchants Bancorp doesn’t stand out for its yield, sitting at just over 1%, but it does offer consistency. The company’s five-year average dividend yield aligns closely with its current yield, which suggests a stable payout history.
What really stands out is the payout ratio. At just 5.71%, MBIN is paying out only a small fraction of its earnings to shareholders. That leaves plenty of room for dividend increases down the road, making it a strong candidate for investors who prefer dividend safety over a high current yield.
Unlike companies that distribute a large portion of profits as dividends, MBIN appears to be taking a balanced approach. It prioritizes reinvesting in the business while still rewarding shareholders, a strategy that often leads to steady growth over time.
Dividend Growth and Safety
Safety is a major factor when evaluating dividends, and MBIN excels in this area. With such a low payout ratio, the company could sustain its dividend even if earnings were to decline temporarily. Many banks distribute anywhere from 30% to 50% of their earnings, so MBIN is operating well below industry norms.
Dividend growth has been steady, with small but meaningful increases over time. While MBIN may not yet be in the league of long-term dividend growth champions, it has the potential to build a strong track record in the coming years.
For those who prioritize dependability in their dividend investments, MBIN’s financial stability makes it an attractive choice.
Chart Analysis
Price Movement and Trend
The chart for Merchants Bancorp (MBIN) shows a clear downtrend over the past several months. After reaching highs above $50, the stock has steadily declined, now sitting at $36.81. It has been trading below both the 50-day and 200-day moving averages, signaling ongoing weakness in the price action.
One of the most noticeable aspects is the failed attempts to break above the 50-day moving average in recent weeks. Every time the price has approached this level, selling pressure has taken over, pushing the stock lower. This suggests that short-term traders are using any rally as an opportunity to exit positions.
The long-term trend is also concerning. The 200-day moving average, which typically acts as a key indicator for overall market sentiment, has started to turn downward. This is a bearish signal that often suggests the stock is struggling to regain investor confidence.
Moving Averages
The 50-day moving average (orange line) has been acting as a resistance level for the stock. Each time the price has attempted to climb above it, the move has been rejected, reinforcing a short-term bearish outlook.
The 200-day moving average (blue line) is also trending lower, which indicates that the broader trend is weakening. When both the 50-day and 200-day moving averages are pointing downward, it generally suggests that long-term investors are either reducing exposure or waiting for a more favorable entry point.
Volume and Market Participation
Volume has remained relatively low, which is notable given the stock’s decline. A significant drop in price without a major increase in volume suggests that the selling pressure is steady rather than panic-driven.
However, there have been a few spikes in volume on red days, which could indicate institutional selling. These moments often coincide with breakdowns below key levels, meaning that larger players may be exiting positions when the stock shows signs of technical weakness.
On the other hand, there hasn’t been a strong volume-based rally, which would be needed to confirm a potential reversal. Until there is a meaningful increase in buying volume, the stock could continue drifting lower or remain range-bound.
Relative Strength Index (RSI)
The RSI, which measures momentum, is trending downward and is currently near oversold levels. This suggests that the stock may be approaching a point where a short-term bounce is possible. However, being oversold alone doesn’t guarantee a rebound—it simply means that selling has been persistent.
If the RSI drops further into extreme oversold conditions, there could be a temporary rally, but without strong buying momentum, it may not be sustainable. Ideally, a move higher in price should be accompanied by an uptick in RSI to confirm that buyers are stepping in with conviction.
Recent Candlestick Action
The last five candles show indecision, with small-bodied candles and relatively equal highs and lows. This type of price action suggests that neither buyers nor sellers have full control at the moment.
The long wicks on some of these candles indicate rejection at higher levels, meaning that any attempt to push the price up has been met with resistance. If this continues, it could suggest that the stock is setting up for another leg lower.
A strong bullish candle with a close near the day’s high would be a sign that buyers are starting to regain some control. But until that happens, the recent price action leans more toward continued weakness rather than a reversal.
Analyst Ratings
📈 Upgrades:
🔹 On January 30, 2025, Raymond James analyst Daniel Tamayo reiterated an “Outperform” rating for MBIN, raising the price target from $50 to $53. This upgrade reflects increased confidence in the company’s ability to generate strong financial performance, particularly in its lending business. Analysts pointed to the bank’s efficient loan portfolio management and favorable net interest margins as key drivers of future growth.
🔹 Piper Sandler’s Nathan Rice also maintained an “Overweight” rating, increasing the price target from $52.50 to $56.50. This adjustment was based on expectations of continued revenue growth and stable credit quality. The firm noted that MBIN’s exposure to the multi-family lending sector remains a strength, even in a shifting interest rate environment.
📉 Downgrades:
🔸 While no major firm has issued a recent downgrade, some analysts have maintained a “Hold” or “Neutral” stance. These cautious perspectives stem from concerns over broader economic conditions, including the potential for rising delinquencies in the mortgage sector and the impact of fluctuating interest rates on loan demand.
🔸 Another area of concern has been MBIN’s stock performance, which has lagged despite solid earnings growth. Some analysts believe the market may already be pricing in much of the bank’s expected upside, leading them to take a more measured approach.
🎯 Consensus Price Target:
The average 12-month price target among analysts currently sits at $54.50, suggesting a potential upside of approximately 40.90% from current levels. Most analysts maintain a “Moderate Buy” recommendation, reflecting optimism about the bank’s earnings growth while acknowledging risks tied to economic cycles and interest rate movements.
Earnings Report Summary
Merchants Bancorp wrapped up 2024 on a strong note, delivering solid financial results that highlighted both growth and resilience. The fourth quarter was particularly impressive, with the company posting a net income of $95.7 million. That’s a 23% increase from the same time last year and a huge 56% jump compared to the previous quarter.
Earnings per share came in at $1.85, reflecting a 17% year-over-year increase. One standout factor was noninterest income, which surged 72% to $24.7 million. This was largely due to favorable adjustments in servicing rights and derivatives, adding about $0.21 per share. Meanwhile, net interest income climbed 8%, showing the company’s ability to navigate a shifting interest rate environment.
For the full year, Merchants Bancorp brought in a record net income of $320.4 million, up 15% from 2023. Diluted earnings per share followed suit, hitting $6.30—another strong 12% improvement. Total assets grew to $18.8 billion, an 11% increase, which speaks to the bank’s expanding reach and ability to attract deposits. The tangible book value per share also hit an all-time high of $34.15, up 25% from the previous year, strengthening the bank’s financial position.
On the lending side, the total loan portfolio grew to $10.4 billion, with warehouse and multi-family loans driving much of the growth. Deposits were another area of focus. Core deposits increased by $1.3 billion to $9.4 billion, while brokered deposits declined by $3.4 billion, signaling a strategic shift toward more stable funding sources.
In November, the bank also raised capital through a preferred stock offering, bringing in $222.7 million. This move helped boost liquidity and strengthen the balance sheet. On the risk management front, a credit default swap on a $1.2 billion warehouse loan pool was executed in December, reducing capital requirements and adding a layer of credit protection.
Non-performing loans did see an uptick, rising to $279.7 million, or 2.68% of total loans, compared to 0.80% the prior year. Much of this was tied to multi-family and healthcare loans affected by rising interest rates. In response, the bank increased its allowance for credit losses to $84.4 million, an 18% rise from the previous year.
Liquidity remains a strong point, with $4.3 billion in unused borrowing capacity, representing 23% of total assets. This ensures the company is well-positioned to handle any market uncertainties while continuing to grow.
Financial Health and Stability
Merchants Bancorp operates with strong profitability, which is essential for maintaining and growing dividends. A look at key financial indicators reveals an efficient and well-run operation.
Return on equity stands at 16.25%, a number that suggests the company is generating excellent returns for shareholders. In banking, ROE is a critical measure of management efficiency, and MBIN is outperforming many of its peers.
Revenue has been growing at a solid pace, with a year-over-year increase of 25.7%, while earnings per share currently sit at $6.30. The balance sheet is also in good shape, with nearly $959 million in cash, providing ample liquidity.
While MBIN does carry $4.4 billion in total debt, that’s typical for a bank of its size. Lending institutions rely on leverage to generate profits, so debt levels are not necessarily a red flag.
Valuation and Stock Performance
From a valuation standpoint, MBIN appears inexpensive. With a price-to-earnings (P/E) ratio of just 5.81, the stock is trading at a significant discount compared to many other financial stocks.
The price-to-book ratio of 1.07 suggests that the stock is trading close to its underlying asset value, which is often seen as a sign of a fair or undervalued stock.
Stock performance has been mixed. The current share price is sitting at $36.61, significantly below its 52-week high of $53.27. The stock has also fallen below both its 50-day and 200-day moving averages, indicating some short-term weakness.
For long-term investors, this could be an opportunity to pick up shares at a discount. The company remains highly profitable, and if earnings growth continues, the stock price may eventually follow.
Risks and Considerations
No investment is without risk, and MBIN is no exception. Several factors could impact the company’s future performance.
One of the biggest risks is interest rate sensitivity. Banks perform best in stable or rising rate environments, but sudden shifts in interest rates can affect loan demand and profitability.
Credit risk is another factor to consider. MBIN is heavily involved in mortgage and multi-family lending, sectors that could be impacted by economic downturns. A slowdown in the housing market or an increase in loan defaults could put pressure on earnings.
Stock volatility is also worth noting. With a beta of 1.17, MBIN is slightly more volatile than the broader market. This means the stock could experience more price swings, which may not appeal to conservative investors.
Final Thoughts
Merchants Bancorp presents a compelling case for dividend investors who value financial strength and long-term growth potential. While the dividend yield isn’t high, it is supported by a rock-solid payout ratio and a profitable business model.
For those seeking stability rather than high-yield payouts, MBIN’s combination of low valuation, strong earnings, and a growing dividend make it an interesting stock to watch.
With the stock currently trading well below its recent highs, there may be an opportunity for long-term investors to enter at an attractive price. While risks remain, MBIN’s financial foundation appears strong enough to weather economic uncertainties and continue rewarding shareholders over time.
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