Fifth Third Bancorp (NASDAQ:FITB) Is Increasing Its Dividend To $0.37

Fifth Third Bancorp's (NASDAQ:FITB) periodic dividend will be increasing on the 15th of October to $0.37, with investors receiving 5.7% more than last year's $0.35. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

Check out our latest analysis for Fifth Third Bancorp

Fifth Third Bancorp's Earnings Will Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Fifth Third Bancorp has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Fifth Third Bancorp's last earnings report, the payout ratio is at a decent 44%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Looking forward, EPS is forecast to rise by 17.4% over the next 3 years. Analysts estimate the future payout ratio will be 43% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Fifth Third Bancorp Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.48 in 2014 to the most recent total annual payment of $1.40. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, Fifth Third Bancorp's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 1.4% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Fifth Third Bancorp Looks Like A Great Dividend Stock

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 Fifth Third Bancorp 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.