Alerus Financial (NASDAQ:ALRS) Is Increasing Its Dividend To $0.19

Alerus Financial Corporation (NASDAQ:ALRS) has announced that it will be increasing its dividend from last year's comparable payment on the 14th of July to $0.19. This makes the dividend yield 5.4%, which is above the industry average.

Check out our latest analysis for Alerus Financial

Alerus Financial's Earnings Will Easily Cover The Distributions

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, Alerus Financial has a long history of paying out a part of its earnings to shareholders. Based on Alerus Financial's last earnings report, the payout ratio is at a decent 37%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next year, EPS is forecast to fall by 0.7%. But if the dividend continues along the path it has been on recently, we estimate the future payout ratio could be 42%, which would be comfortable for the company to continue in the future.

Alerus Financial Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.32 in 2013 to the most recent total annual payment of $0.76. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

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 that Alerus Financial has been growing its earnings per share at 8.1% a year over the past five years. Alerus Financial definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We should note that Alerus Financial has issued stock equal to 16% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We Really Like Alerus Financial's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. As an example, we've identified 1 warning sign for Alerus Financial that you should be aware of before investing. 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.