Alerus Financial (NASDAQ:ALRS) Is Paying Out A Larger Dividend Than Last Year

Alerus Financial Corporation (NASDAQ:ALRS) has announced that it will be increasing its dividend on the 8th of July to US$0.18, which will be 13% higher than last year. This takes the annual payment to 2.6% of the current stock price, which is about average for the industry.

View our latest analysis for Alerus Financial

Alerus Financial's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Alerus Financial was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 10.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 29%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 first annual payment during the last 10 years was US$0.30 in 2012, and the most recent fiscal year payment was US$0.64. This means that it has been growing its distributions at 8.0% per annum 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.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Alerus Financial has been growing its earnings per share at 18% 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.

Alerus Financial Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Alerus Financial for free with public analyst estimates for the company. 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.