A series of (La, Mg)Ni2.8Co0.5 metal hydride alloys was studied in order to understand the effects of partial Al-substitution for Co on the alloy's structure, gaseous phase hydrogen storage properties, and electrochemical performance. The alloys were characterized by X-ray diffraction, scanning electron microscopy, X-ray energy dispersive spectroscopy, pressure-concentration-temperature characterization, half-cell electrochemical tests, and sealed full-cell tests. After an annealing process at 960 °C for 5 h, the main matrix of the Al-free base alloy shifted from AB3 phase into an A2B7 phase. Annealed alloy samples incorporating Al promoted the AB5 phase over the A2B7 phase. The annealing treatment (AB3 to A2B7) increased the gaseous phase hydrogen storage capacity and lowered the plateau pressure and hysteresis in the absorption–desorption isotherms. The addition of Al in the annealed samples (A2B7 to AB5) decreased gaseous phase hydrogen storage and electrochemical capacities, decreased high rate dischargeability, but increased cycle stability. Continuous pulverization of the metal hydride alloy at the negative electrode appeared to be the main failure mode of this series of alloys despite the lower starting rate of pulverization when compared to commercially available AB5 alloys.