Bread Financial Holdings (NYSE:BFH) Has Announced A Dividend Of $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 13th of December. Based on this payment, the dividend yield will be 1.7%, which is fairly typical for the industry.

Check out our latest analysis for Bread Financial Holdings

Bread Financial Holdings' 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.

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 8.5%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, earnings per share is forecast to fall by 21.4% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 12% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend.

Bread Financial Holdings' Dividend Has Lacked Consistency

Looking back, Bread Financial Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was $2.08 in 2016, and the most recent fiscal year payment was $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 the track record hasn't been stellar, we really want to see earnings per share growing over time. Bread Financial Holdings has seen earnings per share falling at 9.3% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

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. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Bread Financial Holdings you should be aware of, and 1 of them doesn't sit too well with us. Is Bread Financial Holdings 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.