Bendigo and Adelaide Bank (ASX:BEN) Is Due To Pay A Dividend Of A$0.265

Bendigo and Adelaide Bank Limited (ASX:BEN) has announced that it will pay a dividend of A$0.265 per share on the 29th of September. This payment means that the dividend yield will be 5.5%, which is around the industry average.

Check out our latest analysis for Bendigo and Adelaide Bank

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

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

Bendigo and Adelaide Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Bendigo and Adelaide Bank's payout ratio of 48% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 27.0% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 69% over the same time period, which is in a pretty comfortable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of A$0.60 in 2012 to the most recent total annual payment of A$0.53. This works out to be a decline of approximately 1.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Bendigo and Adelaide Bank May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings have grown at around 3.8% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 3.8% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, we think Bendigo and Adelaide Bank is a solid choice as a dividend stock, even though the dividend wasn't raised this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Bendigo and Adelaide Bank (of which 2 are concerning!) 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.