Alliant Energy (NASDAQ:LNT) Has Announced That It Will Be Increasing Its Dividend To US$0.43

Alliant Energy Corporation's (NASDAQ:LNT) dividend will be increasing to US$0.43 on 15th of February. Based on the announced payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

See our latest analysis for Alliant Energy

Alliant Energy's Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Alliant Energy's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 6.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 64%, which is in the range that makes us comfortable with the sustainability of the dividend.

Alliant Energy Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was US$0.85 in 2012, and the most recent fiscal year payment was US$1.71. This means that it has been growing its distributions at 7.2% 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.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Alliant Energy has grown earnings per share at 11% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Alliant Energy will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Alliant Energy 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 performing dividend stock.

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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.