Ames National (NASDAQ:ATLO) Has Announced A Dividend Of $0.27

The board of Ames National Corporation (NASDAQ:ATLO) has announced that it will pay a dividend on the 15th of May, with investors receiving $0.27 per share. Based on this payment, the dividend yield on the company's stock will be 5.5%, which is an attractive boost to shareholder returns.

See our latest analysis for Ames National

Ames National Not Expected To Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Ames National has a long history of paying out a part of its earnings to shareholders. While having a long history of dividends is a good sign, Ames National's latest earning reports show that its payout ratio - the ratio of the dividend amount to earnings - currently sits at 98%. This may be worrying, as it shows that Ames National is barely covering its dividend.

EPS is set to fall by 9.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio could reach 114%, which could put the dividend in jeopardy if the company's earnings don't improve.

Ames National Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.64 in 2014, and the most recent fiscal year payment was $1.08. This implies that the company grew its distributions at a yearly rate of about 5.4% over that duration. 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.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Ames National's EPS has declined at around 9.8% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Ames National's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think Ames National is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 3 warning signs for Ames National (of which 1 is potentially serious!) you should know about. Is Ames National not quite the opportunity you were looking for? Why not check out our selection of top 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.