Banco Bilbao Vizcaya Argentaria (BME:BBVA) Is Increasing Its Dividend To €0.3321

Banco Bilbao Vizcaya Argentaria, S.A. (BME:BBVA) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of April to €0.3321. This makes the dividend yield about the same as the industry average at 5.5%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Banco Bilbao Vizcaya Argentaria's stock price has increased by 33% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Banco Bilbao Vizcaya Argentaria

Banco Bilbao Vizcaya Argentaria's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Banco Bilbao Vizcaya Argentaria has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Banco Bilbao Vizcaya Argentaria's last earnings report, the payout ratio is at a decent 42%, 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 5.7%. Analysts forecast the future payout ratio could be 49% 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 2015, the dividend has gone from €0.10 total annually to €0.70. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Banco Bilbao Vizcaya Argentaria has impressed us by growing EPS at 24% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Banco Bilbao Vizcaya Argentaria's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Banco Bilbao Vizcaya Argentaria (of which 1 is a bit unpleasant!) you should know about. 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.