High Dividend 50: Ames National Corporation – Sure Dividend

Revealed on June twenty first, 2024 by Nathan Parsh

Excessive-yield shares pay out dividends which are considerably greater than market common dividends. For instance, the S&P 500’s present yield is just ~1.3%, which is kind of low on an absolute foundation, but additionally on a historic foundation.

Excessive-yield shares may be very useful to shore up earnings after retirement. A $120,000 funding in shares with a median dividend yield of 5% creates $500 a month in dividends.

We’ve got created a spreadsheet of shares (and carefully associated REITs and MLPs, and many others.) with dividend yields of 5% or extra to assist traders discover these high-yield shares simply.

You may obtain your free full record of all excessive dividend shares with 5%+ yields (together with necessary monetary metrics akin to dividend yield and payout ratio) by clicking on the hyperlink under:

Ames Nationwide Company (ATLO) is a part of our ‘Excessive Dividend 50’ sequence, because it has a present yield of 5.4%.

This text will assessment Ames Nationwide Company’s funding prospects.

Enterprise Overview

Ames Nationwide Company is a U.S.-based financial institution holding firm that owns and operates 5 financial institution subsidiaries in central Iowa. The subsidiaries embody two nationwide banks, First Nationwide Financial institution, Ames, Iowa, and State Financial institution & Belief Co., and three state-charted banks, Boone Financial institution & Belief Co., Reliance State Financial institution, and Iowa State Financial savings Financial institution.

The corporate offers a variety of banking providers to people, companies, and municipal entities in Iowa. The financial institution’s lending actions consist primarily of short-term and medium-term business and agricultural actual property loans, residential actual property loans, agricultural and different business-related loans.

Ames Nationwide Company was based in 1903, generates annual income of $54 million, and trades with a market capitalization of $179 million.

Ames Nationwide Company reported earnings outcomes for the primary quarter of 2024 on March thirty first, 2024. Internet earnings of $3.2 million, or $0.36 per share, in contrast unfavorably to internet earnings of $5.1 million, or $0.57 per share, within the prior 12 months.

The lower in earnings is primarily the results of increased curiosity expense on deposits and different borrowed funds. This was partially offset by a rise in curiosity earnings on loans.

Ames Nationwide’s internet curiosity margin contracted 10 foundation factors to 2.2%. Mortgage curiosity earnings improved $2.8 million resulting from increased common rates of interest and a complete loans elevated 4% to $1.27 billion. Mortgage development was supported by positive aspects in agriculture and 1-4 household mortgage portfolios.

Non-interest earnings for the quarter was down $300K, or 11.5%, to $2.3 million. Deposits totaled $1.87 billion, which was a down 1% from $1.90 billion recorded a 12 months in the past. As of March thirty first, 2024, Ames Nationwide Company had whole property of $2.19 billion.

Ames Nationwide Company expects earnings-per-share in a variety of $1.45 to $1.55 for 2024, which might signify development of 25% on the midpoint. Regardless of this, we forecast earnings development of three% per 12 months for the following 5 years given latest outcomes and the headwinds of upper curiosity expense.

Development Prospects

Trying on the final 10 years, Ames Nationwide’s enterprise efficiency has been underwhelming. The financial institution’s earnings-per-share have declined 3.4% yearly over the past decade and it has failed to realize year-over-year development since 2021.

The final three years have been particularly troublesome for the financial institution.

Supply: Investor Relations

Ames Nationwide Company has skilled a sizeable decline in earnings and earnings-per-share over the previous couple of years at the same time as the corporate’s mortgage portfolio and whole property have seen regular development.

Supply: Investor Relations 

The rationale for that is that the financial institution’s earnings and income mannequin are based on the curiosity earnings from loans and funding securities, in addition to charges and commissions from varied monetary providers.

Final 12 months’s earnings declined as a result of curiosity bills are rising quicker than curiosity earnings, with deposit charges rising extra rapidly than charges on loans and investments.

On the plus aspect, Ames Nationwide Company has made strides to enhance its buyer engagement. Since 2019, loans, whole property, and deposits have surged 38%, 46%, and 55%, respectively.

Aggressive Benefits & Recession Efficiency

As a small regional financial institution, Ames Nationwide Company doesn’t have many strategic benefits in comparison with its giant peer group. All the corporate’s service choices may also be discovered at its rivals.

Ames Nationwide Company does have a well-entrenched place within the communities it serves. The corporate has additionally been in enterprise for greater than 100 years and provides it clients a really private expertise.

Like many monetary corporations, Ames Nationwide Company had a severe decline through the Nice Recession:

2007 earnings-per-share: $1.17
2008 earnings-per-share: $0.67 (43% decline)
2009 earnings-per-share: $0.95 (42% improve)
2010 earnings-per-share: $1.37 (44% improve)

Nevertheless, in contrast to many friends, Ames Nationwide Company rapidly returned to development in 2009 and established a brand new excessive for earnings-per-share by 2011.

Earnings-per-share additionally improved 11% from 2019 to 2020 as the corporate demonstrated its resiliency within the face of the Covid-19 pandemic.

Ames Nationwide Company’s efficiency throughout these troublesome financial durations exhibits that it does have a sound enterprise mannequin.

Dividend Evaluation

Whereas earnings grew through the Nice Recession, the corporate’s dividend didn’t. In truth, Ames Nationwide Company diminished its dividend by 64% in 2009. Since then, the dividend has usually elevated by $0.01 per quarter per 12 months.

This was the corporate’s development sample till the dividend was held regular in 2023. Ames Nationwide Company has maintained the identical $0.27 per share quarterly fee for 10 consecutive quarters.

Due to the timing of the funds, Ames Nationwide Company has a dividend development streak of 13 years, although that streak will finish if the distribution isn’t raised for the November fee.

Even with the dividend pause, the corporate has a dividend compound annual development fee of almost 5% over the past decade.

Shares of Ames Nationwide Company yield 5.4%, which is without doubt one of the inventory’s highest yields since at the least 2014 and is greater than 4 instances the common yield of the S&P 500 Index.

Although dividend development may not occur this 12 months, we consider that the dividend is secure. With an annualized dividend of $1.08, the projected payout ratio for this 12 months is 72%. For context, the payout ratio is normally round 50%, although final 12 months it was at 90%.

Subsequently, we don’t undertaking a lot in the best way of dividend development, however we do consider that the corporate will at the least preserve its present distribution.

Remaining Ideas

Ames Nationwide Company is without doubt one of the smallest names in our protection universe, however the firm has an prolonged historical past of offering monetary providers to its clients in Iowa.

Ames Nationwide Company provides a properly above common dividend yield that we think about to be secure.

The financial institution’s enterprise has suffered as increased curiosity bills have greater than offset positive aspects from curiosity earnings. This has restricted its outcomes over the previous few years. Ames Nationwide Company does undertaking to see sturdy development in 2024.

Nevertheless, we don’t anticipate greater than low earnings development after this 12 months, which can restrict whole returns even with the engaging dividend yield. Shares of the corporate obtain a maintain score in consequence.

If you’re keen on discovering high-quality dividend development shares and/or different high-yield securities and earnings securities, the next Positive Dividend assets will likely be helpful:

Excessive-Yield Particular person Safety Analysis

Different Positive Dividend Sources