Bank of America (NYSE:BAC) Is Paying Out A Larger Dividend Than Last Year

Bank of America Corporation (NYSE:BAC) will increase its dividend from last year's comparable payment on the 29th of September to $0.24. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.

View our latest analysis for Bank of America

Bank of America's Earnings Will Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Bank of America has established itself as a dividend paying company with over 10 years history of distributing 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.

EPS is set to fall by 4.5% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 34% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Bank of America Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was $0.04, compared to the most recent full-year payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Bank of America has seen EPS rising for the last five years, at 13% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Bank of America 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. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Bank of America you should be aware of, and 1 of them is significant. Is Bank of America 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.