MainStreet Bancshares, Inc. (NASDAQ:MNSB) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase MainStreet Bancshares' shares before the 12th of November in order to receive the dividend, which the company will pay on the 19th of November.

The company's next dividend payment will be US$0.10 per share, and in the last 12 months, the company paid a total of US$0.40 per share. Calculating the last year's worth of payments shows that MainStreet Bancshares has a trailing yield of 2.2% on the current share price of US$18.20. If you buy this business for its dividend, you should have an idea of whether MainStreet Bancshares's dividend is reliable and sustainable. So we need to investigate whether MainStreet Bancshares can afford its dividend, and if the dividend could grow.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MainStreet Bancshares has a low and conservative payout ratio of just 8.3% of its income after tax.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that MainStreet Bancshares's earnings are down 2.1% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. MainStreet Bancshares has delivered an average of 26% per year annual increase in its dividend, based on the past three years of dividend payments.

The Bottom Line

Is MainStreet Bancshares an attractive dividend stock, or better left on the shelf? MainStreet Bancshares's earnings per share are down over the past five years, although it has the cushion of a low payout ratio, which would suggest a cut to the dividend is relatively unlikely. It doesn't appear an outstanding opportunity, but could be worth a closer look.

However if you're still interested in MainStreet Bancshares as a potential investment, you should definitely consider some of the risks involved with MainStreet Bancshares. Every company has risks, and we've spotted 2 warning signs for MainStreet Bancshares you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.