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Alerus Financial (ALRS) Hikes Dividend: Is It Worth Buying?

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Alerus Financial Corporation’s ALRS board of directors announced a regular quarterly cash dividend of 16 cents per share, marking a 6.7% increase from the prior payout. This dividend will be paid out on July 9 to shareholders of record as of Jun 18, 2021.

Considering last day’s closing price of $28.82, the company’s dividend yield currently stands at 2.2%. This yield is not only attractive to income investors but also represents a steady income stream.

Alerus Financial has been paying quarterly dividends since June 2003. The company is expected to continue enhancing shareholders’ value through sustained capital-deployment activities. Prior to this hike, it raised its quarterly dividend by 7.1% in November 2019 to 15 cents per share.

Also, Alerus Financial has a share-repurchase plan in place. In February 2021, the company’s boards of directors authorized a repurchase program of 770 million shares. The plan is set to expire on Feb 18, 2024.

Alerus Financial’s shares have surged 19.7% over the past six months, outperforming the 14.4% rally of the industry it belongs to.

While it seems that Alerus Financial stock is an attractive investment option right now based on the dividend income, investors interested in this Zacks Rank #2 (Buy) stock can take a look at the company’s fundamentals and growth prospects to properly understand its rewards and risks.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings: Alerus Financial has been witnessing upward earnings estimate revisions, of late, indicating that analysts are optimistic about its prospects. The Zacks Consensus Estimate for 2021 earnings has moved 21.5% upward, over the past 30 days.

Also, the company has an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 71.41%.

Return on Equity (ROE): Alerus Financial’s ROE of 16.95% compares favorably with the industry’s 8.81%, underlining that it does reinvest its cash efficiently.

Leverage: The company currently has a debt/equity ratio of 0.18 compared with the industry average of 0.42. This shows that it is financially stable even in adverse economic conditions.

Valuation: Alerus Financial currently seems undervalued when compared with the industry. It has a price/earnings (F1) ratio of 12.64, which is below the industry’s average of 12.94. Additionally, its price/cash flow ratio of 8.82 is below the industry’s 9.35.

Thus, based on the above-mentioned factors, Alerus Financial’s stock looks worth considering. However, lower interest rates and weak lending scenario remain major near-term concerns. One must consider these downsides before taking any investment decision.

Other Finance Companies Taking Similar Actions

Over the past few months, several finance companies have announced hikes in their quarterly dividends. Some of these are Eagle Bancorp, Inc. EGBN, Bank OZK OZK and Ellington Financial EFC.

Eagle Bancorp raised its quarterly dividend by 13.6%, while Bank OZK increased the same by 0.9%. Furthermore, Ellington Financial has announced a 40% hike in its monthly common stock dividend.

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Eagle Bancorp, Inc. (EGBN) : Free Stock Analysis Report

Ellington Financial Inc. (EFC) : Free Stock Analysis Report

Bank OZK (OZK) : Free Stock Analysis Report

Alerus Financial Corporation (ALRS) : Free Stock Analysis Report

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