Bank of America's (NYSE:BAC) Upcoming Dividend Will Be Larger Than Last Year's

Bank of America Corporation's (NYSE:BAC) dividend will be increasing from last year's payment of the same period to $0.26 on 27th of September. This takes the annual payment to 2.7% of the current stock price, which is about average for the industry.

See our latest analysis for Bank of America

Bank of America's Payment Expected To Have Solid Earnings Coverage

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

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 34%, 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 41.0%. Analysts estimate the future payout ratio will be 27% 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

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was $0.04, compared to the most recent full-year payment of $1.04. This means that it has been growing its distributions at 39% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Bank of America May Find It Hard To Grow The Dividend

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 hasn't seen much change in its earnings per share over the last five years. While growth may be thin on the ground, Bank of America could always pay out a higher proportion of earnings to increase shareholder returns.

Bank of America Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 17 Bank of America analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.