ALLETE's (NYSE:ALE) Upcoming Dividend Will Be Larger Than Last Year's
ALLETE, Inc. (NYSE:ALE) has announced that it will be increasing its periodic dividend on the 1st of March to $0.705, which will be 4.1% higher than last year's comparable payment amount of $0.678. This makes the dividend yield 4.6%, which is above the industry average.
See our latest analysis for ALLETE
ALLETE's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, ALLETE's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 7.1%. If the dividend continues on this path, the payout ratio could be 62% by next year, which we think can be pretty sustainable going forward.
ALLETE Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $1.90, compared to the most recent full-year payment of $2.71. This means that it has been growing its distributions at 3.6% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
We Could See ALLETE's Dividend Growing
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that ALLETE has grown earnings per share at 7.4% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
ALLETE 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 company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, ALLETE has 2 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
