The board of Bank of America Corporation (NYSE:BAC) has announced that it will be paying its dividend of $0.24 on the 29th of September, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 3.1%, 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
Solid dividend yields are great, but they only really help us if the payment is sustainable.
Having distributed dividends for at least 10 years, Bank of America has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 25%, which means that Bank of America would be able to pay its last dividend without pressure on the balance sheet.
Looking forward, earnings per share is forecast to fall by 4.4% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 34% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.
Bank of America Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.04 in 2013, and the most recent fiscal year payment was $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 37% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Bank of America has seen EPS rising for the last five years, at 13% per annum. Bank of America definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like Bank of America's Dividend
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 earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Bank of America has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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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Bank of America (NYSE:BAC) Is Paying Out A Larger Dividend Than Last Year - Yahoo Finance
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