Stock Analysis

Ames National (NASDAQ:ATLO) Is Increasing Its Dividend To US$0.27

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NasdaqCM:ATLO
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The board of Ames National Corporation (NASDAQ:ATLO) has announced that it will be increasing its dividend on the 13th of May to US$0.27. This will take the annual payment to 4.4% of the stock price, which is above what most companies in the industry pay.

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Ames National's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Ames National's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 9.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

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NasdaqCM:ATLO Historic Dividend February 15th 2022

Ames National Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the first annual payment was US$0.44, compared to the most recent full-year payment of US$1.08. This implies that the company grew its distributions at a yearly rate of about 9.4% 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.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see Ames National has been growing its earnings per share at 9.2% a year over the past five years. 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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on Ames National management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for Ames National?

Ames National Corporation operates as a multi-bank holding company that provides banking products and services primarily in Boone, Clarke, Hancock, Marshall, Polk, Story, and Union counties in central, north-central, and south-central Iowa.

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Rewards

  • Trading at 34.4% below our estimate of its fair value

Risks

No risks detected for ATLO from our risks checks.

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