With its 12% dividend yield, is the Alumina share price a buy?

Steady growth coupled with a dividend yield of 11.99% means the Alumina Limited (ASX: AWC) share price could be a great buying opportunity

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While the profit reporting season in February saw dividend payouts reach a record $29.4 billion, company profits haven't lifted as much as in previous years.

Of the 93% of companies that reported interim results in February, only 49% of these companies lifted profits from the previous year.

Two of the biggest catalysts driving the challenge for ASX-listed companies to keep lifting profits is growing margin pressure and the maturity of many industries in Australia. Industry maturity means that a good majority of the companies in the ASX 200 are no longer in aggressive growth phases. Investing in this type of environment makes dividend yields even more important.

With a dividend yield of 12.28% during the February reporting season and a current dividend yield of 11.99%, Alumina Limited (ASX: AWC) could present a great buying opportunity.

How did the Alumina share price perform after its FY18 earnings results?

Alumina Limited is an Australian resources company that invests in bauxite mining, alumina refining and aluminium smelting operations. The company has 40% ownership of Alcoa World Alumina and Chemicals (AWAC), and AWAC, in turn, has a 55% interest in Victoria's Portland smelter.

At its FY18 earning results on 21 February, the company reported a statutory net profit after tax of US635.4 million for the year ending 31 December 2018. This represents an 87% increase from the previous financial year.

Alumina's CEO Mike Ferraro had lots of positive things to say when the results were announced. "This is a record result for our Company, culminating in the highest profit and largest annual dividend paid to shareholders in our history," said Mr. Ferraro.

"The Company has declared a final dividend 52% higher than last year and 2018 total dividends up 68% over the previous year. Alumina Limited's unrivalled focus on alumina has delivered outstanding returns to shareholders."

Upon the release of its FY18 results, the Alumina Limited share price increased slightly from $2.66 to $2.75 in the following trading days. In the month following, the Alumina Limited share price dropped to $2.52, growing steadily back to its current price at $2.57.

Is Alumina Limited a buy?

Year to date, the Alumina Limited share price has grown steadily by 10.85%. This steady growth coupled with the company's current dividend yield of 11.99% means this could be a great buying opportunity for investors who are looking for healthy dividend yields in their portfolios. With this high dividend yield, it could be a nice cash boost each earnings season, or you could reinvest the dividends to keep compounding your returns.

It's important to keep in mind that resources can be a volatile industry and the share prices of companies in this industry can be subject to violent price movements.

For more ASX dividend share ideas, check out these 3 top dividend shares for 2019.

Motley Fool contributor Nicola Smith has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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