Bank of America (NYSE:BAC) Is Increasing Its Dividend To $0.24

Bank of America Corporation (NYSE:BAC) will increase its dividend from last year's comparable payment on the 29th of December to $0.24. This makes the dividend yield about the same as the industry average at 3.2%.

View our latest analysis for Bank of America

Bank of America's Dividend Forecasted To Be Well Covered By Earnings

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

Having distributed dividends for at least 10 years, Bank of America has a long history of paying out a part of its earnings to shareholders. Based on Bank of America's last earnings report, the payout ratio is at a decent 25%, 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 2.1%. Analysts estimate the future payout ratio will be 32% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Bank of America Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.04 in 2013 to the most recent total annual payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Bank of America has impressed us by growing EPS at 12% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Bank of America Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bank of America is a strong income stock thanks to its track record and growing earnings. 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. 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. As an example, we've identified 1 warning sign for Bank of America that you should be aware of before investing. 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.