Alliant Energy (NASDAQ:LNT) Is Paying Out A Larger Dividend Than Last Year

Alliant Energy Corporation (NASDAQ:LNT) has announced that it will be increasing its periodic dividend on the 15th of February to $0.48, which will be 6.1% higher than last year's comparable payment amount of $0.453. This takes the annual payment to 3.7% of the current stock price, which is about average for the industry.

Check out our latest analysis for Alliant Energy

Alliant Energy's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Alliant Energy was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 25.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.

Alliant Energy Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.94 in 2014 to the most recent total annual payment of $1.81. This implies that the company grew its distributions at a yearly rate of about 6.8% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Alliant Energy May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Alliant Energy has only grown its earnings per share at 3.8% per annum over the past five years. Alliant Energy is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Alliant Energy's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Alliant Energy's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Alliant Energy has 2 warning signs (and 1 which is significant) we think you should know about. 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.