Alerus Financial (NASDAQ:ALRS) Has Announced A Dividend Of $0.21

Alerus Financial Corporation (NASDAQ:ALRS) has announced that it will pay a dividend of $0.21 per share on the 10th of October. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.

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Alerus Financial's Payment Expected To Have Solid Earnings Coverage

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. Based on Alerus Financial's last earnings report, the payout ratio is at a decent 50%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next year is set to see EPS grow by 21.3%. If the dividend continues along recent trends, we estimate the future payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Alerus Financial

Alerus Financial Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.40 in 2015, and the most recent fiscal year payment was $0.84. This means that it has been growing its distributions at 7.7% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Alerus Financial May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Alerus Financial's EPS has declined at around 4.2% 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We should note that Alerus Financial has issued stock equal to 28% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Alerus Financial's Dividend

Overall, a consistent dividend is a good thing, and we think that Alerus Financial has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign 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.