Ames National (NASDAQ:ATLO) Is Due To Pay A Dividend Of $0.27

Ames National Corporation (NASDAQ:ATLO) has announced that it will pay a dividend of $0.27 per share on the 15th of November. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.

See our latest analysis for Ames National

Ames National's Dividend Forecasted To Be Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Ames National has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 62%, which means that Ames National would be able to pay its last dividend without pressure on the balance sheet.

If the trend of the last few years continues, EPS will grow by 1.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 64% by next year, which is in a pretty sustainable range.

Ames National Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.60 in 2013 to the most recent total annual payment of $1.08. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year 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.

Ames National May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Ames National's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 1.7% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

Ames National Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Ames National stock. 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.