Bendigo and Adelaide Bank (ASX:BEN) Will Pay A Larger Dividend Than Last Year At A$0.32

The board of Bendigo and Adelaide Bank Limited (ASX:BEN) has announced that it will be paying its dividend of A$0.32 on the 29th of September, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 6.7%, which is in line with the average for the industry.

Check out our latest analysis for Bendigo and Adelaide Bank

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

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. Past distributions do not necessarily guarantee future ones, but Bendigo and Adelaide Bank's payout ratio of 69% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to fall by 2.0%. Fortunately, analysts forecast the future payout ratio to be 70% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was A$0.60, compared to the most recent full-year payment of A$0.64. Dividend payments have grown at less than 1% a year over this period. 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.

The Dividend's Growth Prospects Are Limited

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. Bendigo and Adelaide Bank hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Bendigo and Adelaide Bank's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Bendigo and Adelaide Bank's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.