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Ames National Corporation's (NASDAQ:ATLO) dividend will be increasing to US$0.27 on 13th of May. This will take the annual payment to 4.4% of the stock price, which is above what most companies in the industry pay.
Ames National's Earnings Easily Cover the Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Ames National's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 9.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.
Ames National Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was US$0.44, compared to the most recent full-year payment of US$1.08. This works out to be a compound annual growth rate (CAGR) of approximately 9.4% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
We Could See Ames National's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. Ames National has seen EPS rising for the last five years, at 9.2% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Ames National Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Ames National is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Ames National in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.