The dividend for Bank of America Corporation (NYSE:BAC) will be increased to $0.22 on September 30 from the corresponding payment made last year. The annual payout now equals 2.6 % of the stock price as of today, which is about average for the sector.
According to Forecast, Earnings Will Provide Enough Coverage for Bank of America’s Dividend.
Checking to see if a dividend is sustainable is crucial since we prefer them to be reliable over time. With a history of more than 10 years of distributing earnings to shareholders, Bank of America (NYSE:BAC) has established itself as a dividend-paying business. Based on information from its most recent earnings report, calculating the company’s payout ratio yields a result of 26%, indicating that Bank of America (NYSE:BAC) could pay its final dividend without placing undue strain on the balance sheet. EPS is expected to increase by 44.1 % during the next three years. Analysts expect the payout ratio to rise to 24 % over the same period, a figure we believe the company can sustain.
Bank of America’s Track Record is Solid.
The business has a long history of consistently paying dividends with slight variation. The most recent fiscal year payout was $0.88, while the average yearly payment for the previous ten years was $0.04 in 2012. This results in a compound annual growth rate (CAGR) of almost 36% yearly over that period. It is encouraging to note that dividend growth has been strong and that there haven’t been any reductions in a very long time.
The Dividend Appears Likely to Increase
The dividend income that shareholders who have owned stock in the company for a while will be pleased to receive. The fact that Bank of America (NYSE:BAC) has been increasing its earnings per share at a rate of 13% annually for the previous five years is positive. With yields on the rise and a low payout ratio, Bank of America (NYSE:BAC) undoubtedly has the ability to increase its dividend in the future.
Bank of America Appears to Be a Fantastic Dividend Stock
Overall, we believe this company could be an appealing source of income, and the fact that it is increasing its dividend this year only adds to its appeal. The fact that the business readily makes enough money to cover dividend payments and that this income is being converted into cash flow is fantastic. Considering all of these variables, we believe this stock has strong potential as a dividend investment.
Companies with a consistent dividend policy will probably attract more investor interest than those with a more erratic strategy. However, our readers should be aware of additional factors before investing money in a company. To deepen the discussion, we’ve discovered one cautionary indication for Bank of America (NYSE:BAC) that investors should be aware of going forward.
Featured Image: Megapixl @Robwilson39
