Merchants Bancorp Preferreds: Evaluating the Case for MBINL as a Buy in 2026

Investors seeking high-yield opportunities in the regional banking sector have increasingly turned their attention to preferred stocks, where a blend of attractive dividend payouts and structural protections can offer compelling risk-adjusted returns. Among the most notable candidates is Merchants Bancorp's Series E preferred stock (MBINL), which currently offers a dividend yield of 8.26% and a call protection period extending to January 1, 2030. This article evaluates the case for MBINL as a buy in 2026, analyzing its dividend yield, call protection terms, and relative value against regional bank peers.

Dividend Yield: A Competitive Edge

MBINL's 8.26% annualized dividend yield stands out in a market where regional bank preferreds typically offer yields ranging from 6.9% to 7.7%. For context, Bank OZK's Series A preferred stock (OZKAP) yields 6.92%, while Bridgewater Bancshares' BWBBP offers a 7.65% yield. These figures underscore MBINL's premium positioning. The dividend is non-cumulative, meaning unpaid dividends do not accrue, but the perpetual nature of the security ensures no maturity date to complicate reinvestment risk.

The recent ex-dividend date of December 15, 2025, and the projected payment of $0.4765 per share further reinforce the stock's reliability. Merchants Bancorp's Q3 2025 revenue surged 14.4% year-over-year to $171.1 million, driven by robust performance in mortgage warehousing and multi-family mortgage banking. This operational strength provides a solid foundation for sustaining dividend payments, even as regulatory headwinds-such as the June 2025 Memorandum of Understanding (MOU) with the FDIC and DFI-pose near-term challenges.

Call Protection: A Structural Advantage

Call protection, the period during which an issuer cannot redeem preferred shares without penalty, is a critical consideration for income-focused investors. MBINL's call date of January 1, 2030, grants investors nearly four years of protection-a stark contrast to peers like BWBBP, which becomes callable in August 2026, and OZKAP, which is callable after November 2026. Regions Financial's Series F preferred stock, with a 6.95% yield, offers even less protection, with a redemption option available from September 2029.

This extended call protection reduces the likelihood of early redemption, allowing investors to lock in MBINL's high yield for a longer horizon. For comparison, Atlantic Union Bankshares' AUBAP preferred stock, while offering a 6.375% yield, includes mandatory conversion features that could trigger redemption as early as September 2028. The absence of such constraints in MBINL's structure enhances its appeal for investors prioritizing stability.

Relative Value: Undervaluation and Strategic Positioning

Merchants Bancorp's common stock currently trades at a significant discount to its peers, with a P/E ratio of 8.3x versus the Diversified Financial industry average of 13.6x. This undervaluation, coupled with a strong balance sheet and diversified business model, suggests the company is poised for re-rating. The preferred stock's yield further amplifies this case: at 8.26%, it outpaces both the company's cost of capital and the risk-free rate, offering a margin of safety that is rare in today's market.

Regional banks are also entering a favorable macroeconomic environment in 2026. A steeper yield curve, regulatory easing, and increased M&A activity are expected to bolster net interest margins and strategic growth opportunities. Merchants Bancorp's focus on niche markets-such as multi-family mortgage banking- positions it to capitalize on these trends, even as broader regulatory scrutiny persists.

Risks and Considerations

While MBINL's attributes are compelling, investors must weigh the risks. The June 2025 MOU with regulators could limit the company's ability to expand or raise capital, potentially affecting its long-term growth trajectory. Additionally, the non-cumulative nature of the dividend means that missed payments-though unlikely given current performance-would not be recouped.

Conclusion: A Compelling Case for 2026

Merchants Bancorp's Series E preferred stock (MBINL) presents a rare combination of high yield, extended call protection, and relative undervaluation. Its 8.26% dividend yield outpaces regional peers, while the 2030 call date provides a structural advantage over shorter-protected alternatives. For investors seeking income with downside protection, MBINL offers a compelling case-particularly in a sector poised for renewed growth in 2026.