Alerus Financial Corporation’s (NASDAQ:ALRS) investors are due to receive a payment of $0.21 per share on 9th of January. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.
A big dividend yield for a few years doesn’t mean much if it can’t be sustained.
Alerus Financial has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Alerus Financial’s payout ratio of 41% is a good sign as this means that earnings decently cover dividends.
The next 3 years are set to see EPS grow by 24.8%. The future payout ratio could be 35% over that time period, according to analyst estimates, which is a good look for the future of the dividend.
See our latest analysis for Alerus Financial
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.40 in 2015 to the most recent total annual payment of $0.84. This means that it has been growing its distributions at 7.7% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The company’s investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Alerus Financial’s EPS has declined at around 4.0% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely – the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn’t stellar, but it could make a decent addition to a dividend portfolio.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 5 analysts we track are forecasting for the future. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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.