Banco do Brasil (BVMF:BBAS3) Could Be A Buy For Its Upcoming Dividend

Banco do Brasil S.A. (BVMF:BBAS3) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Banco do Brasil's shares on or after the 12th of June will not receive the dividend, which will be paid on the 21st of June.

The company's next dividend payment will be R$0.457947 per share. Last year, in total, the company distributed R$2.28 to shareholders. Based on the last year's worth of payments, Banco do Brasil stock has a trailing yield of around 8.3% on the current share price of R$27.65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Banco do Brasil has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Banco do Brasil

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Banco do Brasil paying out a modest 42% of its earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Banco do Brasil's earnings per share have risen 19% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Banco do Brasil has delivered an average of 7.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Banco do Brasil for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Banco do Brasil looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

So while Banco do Brasil looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Banco do Brasil has 1 warning sign we think you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.