Banco do Brasil's (BVMF:BBAS3) Dividend Will Be R$0.1866

Banco do Brasil S.A. (BVMF:BBAS3) has announced that it will pay a dividend of R$0.1866 per share on the 27th of September. Based on this payment, the dividend yield on the company's stock will be 8.1%, which is an attractive boost to shareholder returns.

View our latest analysis for Banco do Brasil

Banco do Brasil's Dividend Forecasted To Be Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Banco do Brasil has a long history of paying out a part of its earnings to shareholders. Based on Banco do Brasil's last earnings report, the payout ratio is at a decent 49%, meaning that the company is able to pay out its dividend with a bit of room to spare.

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

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 R$1.12 in 2014 to the most recent total annual payment of R$2.28. This means that it has been growing its distributions at 7.4% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. We are encouraged to see that Banco do Brasil has grown earnings per share at 15% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Banco do Brasil Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Banco do Brasil that investors need to be conscious of moving forward. Is Banco do Brasil not quite the opportunity you were looking for? Why not check out our selection of top 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.