Is Midland States (MSBI) Worth a Watch for Robust Dividends?

Given the ongoing turmoil in the banking industry and expectations of recession in the near-term, solid dividend-yielding stocks are highly desirable. One such stock is Midland States Bancorp, Inc. MSBI.

This Effingham, IL-based company is mainly focused on offering commercial and consumer banking products and services, merchant credit card services, trust and investment management and insurance and financial planning services. MSBI has been increasing its quarterly dividend on a regular basis. Over the past five years, the company increased its dividend five times, with an annualized dividend growth rate of 6.7%.

Considering the last day’s closing price of $21.29, Midland States’ dividend yield currently stands at 5.64%. This is impressive compared with the industry average of 3.2% and attractive for income investors as it represents a steady income stream.

Midland States Bancorp, Inc. Dividend Yield (TTM)

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Midland States Bancorp, Inc. Dividend Yield (TTM)

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Is the Midland States stock worth a look to earn a high dividend yield? Let’s check out the company financials to understand the risks and rewards. This will help us make a proper investment decision.

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Midland States has been repurchasing its common stock at regular intervals and is likely to continue the trend going forward. In December 2022, it authorized a new share repurchase program of up to an aggregate of $25 million of its common stock through Dec 31, 2023. As of Mar 31, 2023, nearly $22.2 million worth of repurchase authorization remained.

Midland States remains focused on its organic growth strategy. Revenues witnessed a compound annual growth rate (CAGR) of 11.8% over the three-year period ended 2022. The momentum continued in the first quarter of 2023. During the same time frame, net loans witnessed a CAGR of 11.3%. Supported by steady loan demand and higher rates, along with the efforts to strengthen fee income, Midland States’ top-line growth is expected to continue.

The Federal Reserve is expected to keep the interest rates high in the near term to control inflation despite pausing the hike now. Midland States’ net interest margin is likely to keep rising in the near term, though the pace will likely slow down on rising funding costs.

Additionally, MSBI’s inorganic expansion efforts are impressive and support its financials. In 2022, the company completed the acquisition of deposits, loans and assets associated with FNBC’s branches in Mokena and Yorkville, IL. In 2021, it acquired all the assets of ATG Trust. These and several other deals have boosted the company’s market share in Illinois.

Midland States’ trailing 12-month return on equity (ROE) indicates its growth potential. The company’s ROE of 14.05% compares favorably with 12.14% for the industry. Thus, this reflects that it is more efficient in using shareholder funds.

Despite near-term headwinds that include rising expenses and a tough operating environment, MSBI is fundamentally solid. In the past three months, shares of Midland States have declined 5.3% compared with the industry’s fall of 7.9%.

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Therefore, income investors should keep this Zacks Rank #3 (Hold) stock on their radar as this will help generate robust returns over time. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Other Finance Stocks With Solid Dividends

A couple of other finance stocks like Ares Capital Corporation ARCC and Heritage Commerce Corp HTBK are worth a look as these too have robust dividend yields.

Considering the last day’s closing price, Ares Capital’s dividend yield currently stands at 10%. Over the past three months, shares of ARCC have gained 5.6%.

Based on the last day’s closing price, Heritage Commerce’s dividend yield currently stands at 6%. Over the past three months, shares of HTBK have lost 9.3%.

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