Bread Financial Holdings' (NYSE:BFH) Dividend Will Be $0.21

The board of Bread Financial Holdings, Inc. (NYSE:BFH) has announced that it will pay a dividend of $0.21 per share on the 21st of March. This payment means the dividend yield will be 1.3%, which is below the average for the industry.

View our latest analysis for Bread Financial Holdings

Bread Financial Holdings' Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Bread Financial Holdings has a good history of paying out dividends, with its current track record at 8 years. Using data from its latest earnings report, Bread Financial Holdings' payout ratio sits at 13%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to expand by 73.8%. Analysts estimate the future payout ratio will be 11% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Bread Financial Holdings' Dividend Has Lacked Consistency

It's comforting to see that Bread Financial Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from $2.08 total annually to $0.84. The dividend has fallen 60% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Bread Financial Holdings' earnings per share has shrunk at 11% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Bread Financial Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Bread Financial Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Bread Financial Holdings that investors should know about before committing capital to this stock. 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.