Medallion Financial (NASDAQ: MFIN) has announced another increase to its quarterly dividend, raising it from $0.11 to $0.12 per share. That’s a nine percent jump and marks the third time in three years the company has increased its payout since bringing it back. The stock now offers a dividend yield of around 5.3 percent.

The company also reported a solid first quarter. Net income came in at $15.6 million, slightly up from $14.5 million a year ago. During the quarter, Medallion repurchased over 60,000 shares at an average price of $8.83 per share. It still has about $14.9 million remaining under its $40 million buyback program.

At a glance, everything looks strong. The dividend is well covered by earnings, and management is actively returning value to shareholders through both dividends and buybacks. Earnings are expected to grow at a modest pace of around 3.3 percent per year.

Sounds Too Good to Last

The company’s profit margins have slipped to 11.9 percent from 17.9 percent last year. Its dividend history is also shaky, with at least one cut over the past decade. Plus, interest payments aren’t fully covered by earnings, which could become a problem if growth slows.

Valuation is another concern. The stock is trading at $9.10, but analysts estimate that’s more than 600 percent above its fair value. So while it may look attractive on the surface, investors might be paying too much.

Looking ahead, management expects to grow its loan portfolio by 5 to 7 percent in 2025 while maintaining credit quality. That’s a steady plan, but with risks around valuation and profit pressure, this stock might not be for everyone.

For income investors, Medallion Financial has some appeal. But the fundamentals suggest this is a stock that needs a closer look before jumping in.