Bank of America's (NYSE:BAC) Dividend Will Be Increased To $0.26

Bank of America Corporation (NYSE:BAC) will increase its dividend on the 27th of September to $0.26, which is 8.3% higher than last year's payment from the same period of $0.24. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Bank of America

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

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Bank of America has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Bank of America's last earnings report, the payout ratio is at a decent 34%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 30.4%. The future payout ratio could be 32% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Bank of America Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $0.04 in 2014, and the most recent fiscal year payment was $0.96. This means that it has been growing its distributions at 37% 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.

Bank of America May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that Bank of America's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. While EPS growth is quite low, Bank of America has the option to increase the payout ratio to return more cash to shareholders.

We Really Like Bank of America's Dividend

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 19 analysts we track are forecasting for Bank of America for free with public analyst estimates for the company. 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.

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