Are You Looking for a High-Growth Dividend Stock?

Getting big returns from financial portfolios, whether through stocks, bonds, ETFs, other securities, or a combination of all, is an investor's dream. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.

Cash flow can come from bond interest, interest from other types of investments, and, of course, dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric that measures a dividend as a percent of the current stock price. Many academic studies show that dividends make up large portions of long-term returns, and in many cases, dividend contributions surpass one-third of total returns.

Mercantile Bank (MBWM) is headquartered in Grand Rapids, and is in the Finance sector. The stock has seen a price change of 10.83% since the start of the year. The holding company for Mercantile Bank of Michigan is currently shelling out a dividend of $0.38 per share, with a dividend yield of 2.85%. This compares to the Banks - Midwest industry's yield of 2.81% and the S&P 500's yield of 1.35%.

Looking at dividend growth, the company's current annualized dividend of $1.52 is up 1.3% from last year. Over the last 5 years, Mercantile Bank has increased its dividend 5 times on a year-over-year basis for an average annual increase of 6.33%. Looking ahead, future dividend growth will be dependent on earnings growth and payout ratio, which is the proportion of a company's annual earnings per share that it pays out as a dividend. Mercantile Bank's current payout ratio is 29%, meaning it paid out 29% of its trailing 12-month EPS as dividend.

Looking at this fiscal year, MBWM expects solid earnings growth. The Zacks Consensus Estimate for 2026 is $5.59 per share, which represents a year-over-year growth rate of 2.19%.

From greatly improving stock investing profits and reducing overall portfolio risk to providing tax advantages, investors like dividends for a variety of different reasons. However, not all companies offer a quarterly payout.

High-growth firms or tech start-ups, for example, rarely provide their shareholders a dividend, while larger, more established companies that have more secure profits are often seen as the best dividend options. During periods of rising interest rates, income investors must be mindful that high-yielding stocks tend to struggle. That said, they can take comfort from the fact that MBWM is not only an attractive dividend play, but also represents a compelling investment opportunity with a Zacks Rank of #2 (Buy).

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This article originally published on Zacks Investment Research (zacks.com).

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