Bank of America Corporation (NYSE:BAC) will increase its dividend from last year’s comparable payment on the 27th of September to $0.26. Based on this payment, the dividend yield for the company will be 2.7%, which is fairly typical for the industry.
Check out our latest analysis for Bank of America
Bank of America’s Dividend Forecasted To Be Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.
Bank of America has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Bank of America’s payout ratio of 34% is a good sign as this means that earnings decently cover dividends.
Over the next 3 years, EPS is forecast to expand by 41.0%. Analysts forecast the future payout ratio could be 27% over the same time horizon, which is a number we think the company can maintain.
Bank of America Has A Solid Track Record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2014, the dividend has gone from $0.04 total annually to $1.04. This means that it has been growing its distributions at 39% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven’t experienced any notable falls during this period.
Bank of America May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, Bank of America’s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. If Bank of America is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
We Really Like Bank of America’s Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 17 Bank of America analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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