Yahoo Finance Alerus Financial (NASDAQ:ALRS) Is Increasing Its Dividend To $0.20
The board of Alerus Financial Corporation (NASDAQ:ALRS) has announced that the dividend on 15th of July will be increased to $0.20, which will be 5.3% higher than last year's payment of $0.19 which covered the same period. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for Alerus Financial
Alerus Financial Will Pay Out More Than It Is Earning
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.
Alerus Financial has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. But while this history shows that the company was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company did not make enough earnings to cover its dividend payout. This is an alarming sign that could mean that Alerus Financial's dividend at its current rate may no longer be sustainable for longer.
Over the next year, EPS is forecast to expand by 71.5%. If the dividend continues on its recent course, the future payout ratio in 12 months could be 96%, which is a bit high and could start applying pressure to the balance sheet.
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. Since 2014, the dividend has gone from $0.347 total annually to $0.76. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year 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 Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 23% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
The Dividend Could Prove To Be Unreliable
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Alerus Financial is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Alerus Financial that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
