Bank of America Corporation (NYSE:BAC) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of September to $0.22. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.
Bank of America's Dividend Forecasted To Be Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Bank of America has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Bank of America's last earnings report, the payout ratio is at a decent 26%, meaning that the company is able to pay out its dividend with a bit of room to spare.
The next 3 years are set to see EPS grow by 44.1%. Analysts forecast the future payout ratio could be 24% over the same time horizon, which is a number we think the company can maintain.
Bank of America Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.04 in 2012, and the most recent fiscal year payment was $0.88. This means that it has been growing its distributions at 36% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Bank of America has impressed us by growing EPS at 13% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Bank of America Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Bank of America is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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. Is Bank of America not quite the opportunity you were looking for? Why not check out our selection of top 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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