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Could Allete (NYSE: ALE) Cut its Dividend?

Written by Wealth Daily Research Team
Posted August 9, 2019

Today is Friday, August 9, 2019, and this is your daily dividend safety update. Today we’re looking at Allete (NYSE: ALE) stock to see whether its 2.67% dividend is safe.

Let’s look at the company’s payout ratio, cash flow growth, and dividend history to gauge the probability of a dividend cut in the next few years.

Payout Ratio (Dividends/Earnings)

Allete has a payout ratio of 60.2%. That’s low enough for us! Payout ratio equals dividends per share divided by earnings per share. A low payout ratio indicates that the company has plenty of money to cover its dividend. We’d be more concerned if the ratio was closer to 100% (or over it).

Cash Flow Growth Year-Over-Year

Allete has not grown its cash flow in the last year. That’s a bad omen for dividend investors. No cash flow means no dividend, so if cash flow isn’t growing, that’s a problem for us.

Dividend History & Recent Cuts

Allete has not cut its dividend in the recent past. That’s a good sign. It’s not a guarantee that the company will never cut its dividend, but companies that have cut their dividends recently are generally more likely to cut them again.

The Takeaway

Allete stock has failed 1 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is possible in the next few years.

Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than Allete. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.

P.S. Are you worried about the safety of your dividend stocks? Is there a particular stock you want us to grade next? Leave the ticker symbol in the comment section below.

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