Bendigo and Adelaide Bank (ASX:BEN) Has Announced That It Will Be Increasing Its Dividend To A$0.32

Bendigo and Adelaide Bank Limited's (ASX:BEN) dividend will be increasing from last year's payment of the same period to A$0.32 on 29th of September. The payment will take the dividend yield to 6.8%, which is in line with the average for the industry.

See our latest analysis for Bendigo and Adelaide Bank

Bendigo and Adelaide Bank's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Bendigo and Adelaide Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 69%, which means that Bendigo and Adelaide Bank would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, earnings per share is forecast to fall by 3.2% over the next 3 years. However, as estimated by analysts, the future payout ratio could be 71% over the same time period, which we think the company can easily maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of A$0.60 in 2013 to the most recent total annual payment of A$0.64. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

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. However, Bendigo and Adelaide Bank's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Bendigo and Adelaide Bank is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Bendigo and Adelaide Bank that investors need to be conscious of moving forward. 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.