Bendigo and Adelaide Bank (ASX:BEN) Has Announced That It Will Be Increasing Its Dividend To A$0.33

Bendigo and Adelaide Bank Limited (ASX:BEN) will increase its dividend from last year's comparable payment on the 30th of September to A$0.33. Based on this payment, the dividend yield for the company will be 5.3%, which is fairly typical for the industry.

See our latest analysis for Bendigo and Adelaide Bank

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, Bendigo and Adelaide Bank has a long history of paying out a part of its earnings to shareholders. Based on Bendigo and Adelaide Bank's last earnings report, the payout ratio is at a decent 65%, meaning that the company is able to pay out its dividend with a bit of room to spare.

EPS is set to fall by 3.6% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 73% over the same time period, which is in a pretty comfortable range.

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 2014, the annual payment back then was A$0.62, compared to the most recent full-year payment of A$0.63. Its dividends have grown at less than 1% per annum over this time frame. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings has been rising at 4.6% per annum over the last five years, which admittedly is a bit slow. Growth of 4.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Bendigo and Adelaide Bank's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. For instance, we've picked out 2 warning signs for Bendigo and Adelaide Bank that investors should take into consideration. 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.