Alerus Financial: A Dividend Dynamo with Room to Grow – Time to Buy!

The stock market is full of distractions, but today I'm locking in on a quiet banking powerhouse that's quietly delivering 5% dividend hikes, rock-solid earnings, and a valuation that even a value hunter like me can't ignore. Alerus Financial (ALRS) just announced another dividend increase, and this is a signal that income investors should sit up and take notice.

The Dividend Machine Is Firing on All Cylinders

Let's start with what matters most to income investors: cash in your pocket. On May 21, Alerus raised its quarterly dividend to $0.21 per share, a 5% boost from last year. That might not sound earth-shattering, but here's why it's huge: this is the second dividend increase in 2025 alone, following a 5.26% hike in February. Over the past three years, dividends have grown at a 7.84% annualized rate, and this company has raised payouts for 24 straight years.

This isn't luck—it's strategy. The payout ratio is a healthy 73%, well below the danger zone, and Q1 earnings of $13.3 million (up 108% from Q4 2024) are fueling the fire. The annualized dividend yield now sits at 4%, and analysts project it could hit 4.2% within three years. If you're tired of “growth at all costs” stocks that skip dividends, this is your antidote.

Valuation: A Rare Bargain in Banking

Now, let's talk numbers. At a Forward P/E of 9.31, Alerus is trading at a 30% discount to the S&P 500's average P/E of 13.2, and it's even cheaper than some banking peers. For example, Voya Financial (VOYA) trades at a 7.86 Forward P/E, but Alerus's faster dividend growth and better earnings momentum give it a leg up.

The Price-to-Book (P/B) ratio of 1.02 shows the stock is only slightly above its book value—meaning you're not overpaying for assets. Compare this to Bank of America (BAC), which trades at 1.36 P/B, and you'll see Alerus is a relative steal.

Why Now Is the Time to Buy

This isn't just about dividends and valuation. Alerus is executing. The acquisition of HMN Financial last October added $1.1 billion in loans and $1.2 billion in deposits, boosting scale without over-leveraging the balance sheet. Net interest margins hit 3.41% in Q1, up 21 basis points from Q4, proving they're capitalizing on higher rates.

The stock is also near its 52-week low, trading at $20.77. Analysts have a $21.20 price target, and with a 4% yield, you're getting paid to wait if the stock dips further.

Risks? Sure, But Manageable

No stock is risk-free. Alerus operates in a rate-sensitive sector, and rising defaults could crimp profits. But their nonperforming loans are a tight 1.24% of the portfolio, and deposits are growing. Plus, the dividend is rock solid, with a payout ratio that leaves room for earnings volatility.

Bottom Line: Income Investors, This Is Your Move

Alerus Financial isn't flashy, but it's the kind of steady, dividend-focused stock that builds wealth over time. With a 4% yield, a 9.31 Forward P/E, and growth that's accelerating, this is a buy now situation.

Action Alert! If you're looking for income and value, Alerus Financial is a must-own. Buy now, collect the dividend, and let this quiet champion work for your portfolio.

This is a no-brainer. Don't let this one slip away!