Banco do Brasil (BVMF:BBAS3) Will Pay A Dividend Of R$0.4715

Banco do Brasil S.A. (BVMF:BBAS3) has announced that it will pay a dividend of R$0.4715 per share on the 30th of August. Based on this payment, the dividend yield on the company's stock will be 8.0%, which is an attractive boost to shareholder returns.

View our latest analysis for Banco do Brasil

Banco do Brasil's Payment Expected To Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Banco do Brasil has a long history of paying out dividends, with its current track record at a minimum of 10 years. Taking data from its last earnings report, calculating for the company's payout ratio shows 49%, which means that Banco do Brasil would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 36.4%. Analysts forecast the future payout ratio could be 45% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was R$1.12, compared to the most recent full-year payment of R$2.28. This works out to be a compound annual growth rate (CAGR) of approximately 7.4% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Banco do Brasil might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Banco do Brasil has seen EPS rising for the last five years, at 15% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Banco do Brasil's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Banco do Brasil that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of 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.