Some investors rely on dividends for growing their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that Alerus Financial Corporation (NASDAQ:ALRS) is about to go ex-dividend in just four days. You will need to purchase shares before the 17th of September to receive the dividend, which will be paid on the 9th of October.
Alerus Financial’s next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$0.60 to shareholders. Last year’s total dividend payments show that Alerus Financial has a trailing yield of 2.7% on the current share price of $21.94. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Alerus Financial paid out a comfortable 32% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it’s a relief to see Alerus Financial earnings per share are up 3.9% per annum over the last five years.
We’d also point out that Alerus Financial issued a meaningful number of new shares in the past year. It’s hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Alerus Financial has lifted its dividend by approximately 7.9% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Alerus Financial an attractive dividend stock, or better left on the shelf? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Alerus Financial appears to have some promise as a dividend stock, and we’d suggest taking a closer look at it.
In light of that, while Alerus Financial has an appealing dividend, it’s worth knowing the risks involved with this stock. Be aware that Alerus Financial is showing 2 warning signs in our investment analysis, and 1 of those is significant…
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.