MainStreet Bancshares, Inc.'s (NASDAQ:MNSB) investors are due to receive a payment of $0.10 per share on 16th of August. The dividend yield is 2.5% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for MainStreet Bancshares

MainStreet Bancshares' Earnings Will Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock.

MainStreet Bancshares is just starting to establish itself as being able to pay dividends to shareholders, given its short 3-year history of distributing earnings. Despite the company's shorter dividend history however, calculating for its payout ratio of 9.9% shows that MainStreet Bancshares is able to comfortably pay dividends.

Over the next year, EPS is forecast to fall by 33.4%. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 29%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

MainStreet Bancshares Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.20 in 2021 to the most recent total annual payment of $0.40. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

We Could See MainStreet Bancshares' Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. MainStreet Bancshares has seen EPS rising for the last five years, at 5.1% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On MainStreet Bancshares' Dividend

Overall, we think MainStreet Bancshares is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for MainStreet Bancshares (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.