Bread Financial Holdings (NYSE:BFH) Has Affirmed Its Dividend Of $0.21

Bread Financial Holdings, Inc. (NYSE:BFH) will pay a dividend of $0.21 on the 13th of September. Including this payment, the dividend yield on the stock will be 1.5%, which is a modest boost for shareholders' returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bread Financial Holdings' stock price has increased by 45% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Bread Financial Holdings

Bread Financial Holdings' Earnings Will Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive.

Bread Financial Holdings has established itself as a dividend paying company, given its 8-year history of distributing earnings to shareholders. While past records don't necessarily translate into future results, the company's payout ratio of 8.5% also shows that Bread Financial Holdings is able to comfortably pay dividends.

EPS is set to fall by 18.1% over the next 3 years. Despite that, analysts estimate the future payout ratio could be 12% over the same time period, which is in a pretty comfortable range.

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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was $2.08, compared to the most recent full-year payment of $0.84. Dividend payments have fallen sharply, down 60% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Is Doubtful

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Bread Financial Holdings has seen earnings per share falling at 9.4% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Bread Financial Holdings has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.

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