Alerus Financial Corporation’s (NASDAQ:ALRS) dividend will be increasing on the 9th of July to US$0.16, with investors receiving 6.7% more than last year. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.
See our latest analysis for Alerus Financial
Alerus Financial’s Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Alerus Financial’s dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to fall by 31.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 30%, which we consider to be quite comfortable, with most of the company’s earnings left over to grow the business in the future.
NasdaqCM:ALRS Historic Dividend May 15th 2021
Alerus Financial Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was US$0.29 in 2011, and the most recent fiscal year payment was US$0.60. This means that it has been growing its distributions at 7.4% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Alerus Financial has seen EPS rising for the last five years, at 23% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Alerus Financial Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Alerus Financial is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company’s distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don’t think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we’ve picked out 1 warning sign for Alerus Financial that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.
When trading Alerus Financial or any other investment, use the platform considered by many to be the Professional’s Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.
This article by Simply Wall St is general in nature. 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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.