Ames National Corporation (NASDAQ:ATLO) has announced that it will pay a dividend of $0.27 per share on the 15th of August. This makes the dividend yield 5.5%, which will augment investor returns quite nicely.
Ames National's Dividend Forecasted To Be Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.
Having distributed dividends for at least 10 years, Ames National has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 62%, which means that Ames National would be able to pay its last dividend without pressure on the balance sheet.
If the trend of the last few years continues, EPS will grow by 1.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the future payout ratio could be 64% by next year, which is in a pretty sustainable range.
Ames National Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.60 total annually to $1.08. This means that it has been growing its distributions at 6.1% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
Ames National May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Ames National hasn't seen much change in its earnings per share over the last five years. Growth of 1.7% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
We Really Like Ames National's Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Ames National in our latest insider ownership analysis. 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.
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