Bendigo and Adelaide Bank (ASX:BEN) Has Announced A Dividend Of A$0.33

Bendigo and Adelaide Bank Limited's (ASX:BEN) investors are due to receive a payment of A$0.33 per share on 30th of September. Based on this payment, the dividend yield will be 4.7%, which is fairly typical for the industry.

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Bendigo and Adelaide Bank's Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Bendigo and Adelaide Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. But while this history shows that the company was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company did not make enough earnings to cover its dividend payout. This is an alarming sign for the sustainability of its dividends, as it may mean that Bendigo and Adelaide Bankis pulling cash from elsewhere to keep its shareholders happy.

Looking forward, EPS is forecast to rise by 113.1% over the next 3 years. Analysts estimate the future payout ratio will be 66% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Bendigo and Adelaide Bank

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from A$0.66 total annually to A$0.63. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bendigo and Adelaide Bank has seen earnings per share falling at 3.2% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Bendigo and Adelaide Bank's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Bendigo and Adelaide Bank make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Bendigo and Adelaide Bank that you should be aware of before investing. 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.