Last update on 2024-06-27

Alliant Energy (LNT) - Dividend Analysis (Final Score: 5/8)

Discover Alliant Energy's (LNT) dividend analysis, scoring 5/8 in an 8-criteria evaluation of performance and stability.

Short Analysis - Dividend Score: 5

We're running Alliant Energy (LNT) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The dividend analysis for Alliant Energy (LNT) evaluates its dividend policy using 8 criteria. Alliant Energy shows strengths in several areas, such as a higher dividend yield than the industry average, adequately covered dividends by earnings, stable and growing dividends, and a long history of over 25 years of dividend payments. However, it falls short in some aspects like failing to consistently achieve a 5% average annual growth rate, fluctuating payout ratios, mixed results in dividends covered by free cash flow, and lack of reliable stock repurchases over the past 20 years.

Insights for Value Investors Seeking Stable Income

Alliant Energy may be a worthwhile consideration for income-seeking investors because of its strong dividend yield, stable dividend policy, and long history of payments. However, investors should note the inconsistent average annual growth rate and mixed results in payout ratios and cash flow coverage. The lack of consistent stock repurchases could also be a drawback. Therefore, while it is a good option for those focusing on stable dividends, prospective investors should weigh these limitations carefully.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield represents the ratio of a company's annual dividend to its share price. This is important for evaluating the income generated from an investment in the stock.

Alliant Energy's current dividend yield of 3.5322% surpasses the industry average of 3.12%, suggesting that investors might consider LNT a more attractive source of dividends compared to its peers. The historical data shows fluctuations, with peaks in 2009 (4.957%) and 2012 (6.1489%), and lows in 2019 (2.595%). Overall, LNT's dividend yield has remained relatively consistent in competitive terms, often outpacing the industry standard. This trend is positive for yield-seeking investors despite a moderate stock price increase over the years, indicating stable or growing cash returns relative to share value.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the growth in dividends paid to shareholders over time and is important as it indicates a company's financial health and its potential to provide ongoing returns.

Examining Alliant Energy's Dividend Ratio over the last 20 years uncovers a fluctuating pattern (ranging from -50% to 58.82%), resulting in an average growth rate of 4.83%. While the average is close to 5%, it fails to consistently surpass this threshold. Such variability could be disconcerting to investors looking for steady dividend growth. Although the company's dividend has increased over time, the inconsistency suggests periods of financial instability or strategic changes that could impact investor confidence.

Average annual Payout Ratio lower than 65% in the last 20 years?

Average payout ratio criterion is essential as it indicates the proportion of earnings distributed as dividends over a set period, ideally under 65% for sustainability.

Alliant Energy’s payout ratio has seen significant variance over the past 20 years, including a notably negative and exceptionally high spikes (-1593.9394 in 2005 and 127.6161 in 2009), influencing the average payout ratio to -15.434. However, excluding anomalies, many years have ratios around or below 65%, driving a relatively stable overall figure. Close monitoring is essential, but trends fundamentally align well with the criterion.

Dividends Well Covered by Earnings?

This criterion evaluates if the company's dividends are adequately supported by its earnings per share (EPS). A lower dividend payout ratio (<1) indicates that the company has enough earnings to cover dividends, which is a sign of financial stability and a sustainable dividend policy.

Analyzing Alliant Energy's financial performance from 2003 to 2023, we can see that the EPS began at $0.9038 in 2003 and increased steadily to $2.7787 by 2023. Concurrently, the Dividend per Share rose from $0.5 in 2003 to $1.812 by 2023. The dividend payout ratio consistently stayed below 1 (except for 2005), indicating that the company's earnings adequately covered the dividends. Lower payout ratios (below 1) denote a trend where dividends are well-supported by earnings. This trend reflects sound financial management and augurs well for dividend sustainability.

Dividends Well Covered by Cash Flow?

This criterion examines the relationship between Alliant Energy's free cash flow and its dividend payouts. It is important because a company's dividends should ideally be well-covered by its cash flow to ensure sustainability. If dividends are not adequately covered, the company may face risks in maintaining its dividend payments during downturns or require debt financing, which might not be sustainable in the long term.

Examining Alliant Energy's historical data from 2003 to 2023, we notice mixed results in how well dividends have been covered by free cash flow. Values ranged significantly, with negative coverage early on (-0.24 in 2003 and -0.77 in 2004), which indicates that the company’s free cash flow was insufficient to cover dividend payouts during these years. Very high positive values occasionally, like the years in 2005 (3.22) or 2006 (22.78), suggest particularly strong cash flows relative to dividend payments. Despite weaker cash coverage in some years, particularly in 2022-2023 (0.88 and 0.52 respectively), more consistently positive values from 2009 onwards indicate generally improved coverage. Overall, improving trends shown may be viewed as a good sign, as they suggest that the company has found more balance in ensuring dividend coverage through free cash flows over time.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments means a reliable source of income for investors over the long term. A drop of more than 20% in dividends paid in any year can signal financial instability or cash flow problems within a company, making it a riskier investment for income-seeking investors.

Alliant Energy (LNT) has shown an impressive track record of stable and growing dividends over the past 20 years. The dividend per share has increased from $0.5 in 2003 to $1.812 in 2023, demonstrating robust growth. There was no year when Alliant Energy dropped its dividend by 20% or more, indicating strong financial health and consistent dividend policies. For instance, the jump from $0.85 in 2011 to $1.35 in 2012, although quite substantial, did not reverse or fall back in subsequent years, showcasing reliable performance. This trend is favorable for investors looking for a steady income stream.

Dividends Paid for Over 25 Years?

Examine whether Alliant Energy (LNT) has paid dividends consistently for over 25 years and why this consistency matters for investors.

Alliant Energy (LNT) has demonstrated a strong commitment to returning value to shareholders through dividends over the past 26 years. Despite minor fluctuations, dividends per share (DPS) have shown a general upward trend from $1.0005 in 1998 to $1.812 in 2023. For instance, DPS was relatively flat at $1.00 from 1998 to 2002, saw a slight dip to $0.50 in 2003, and then began a more consistent rise, culminating in steady increases yearly from 2010 onward. This trend indicates robust financial health and a shareholder-focused approach, both reassuring factors for current and potential investors, signaling long-term stability and reliability in dividend payouts.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases over the past 20 years is an important criterion because it shows the company's commitment to returning value to shareholders. Companies that consistently buy back their own shares can indicate confidence in their business and stabilize or improve share prices.

Alliant Energy (LNT) shows a mixed record of stock repurchases over the past 20 years, with reliable buybacks only in the years 2007 and 2008. The average repurchase rate of 1.1464% is relatively low, and the total number of shares has generally increased from 203,088,000 in 2003 to 253,000,000 in 2023. This suggests that the company has been issuing more shares than it has been repurchasing, which is generally not a favorable trend. The lack of consistent repurchases implies that shareholders may not experience the same level of value return or confidence from the management. This trend is generally not good for the criterion of reliable stock repurchases.