Bristol-Myers Squibb (NYSE:BMY) Is Increasing Its Dividend To $0.57

Bristol-Myers Squibb Company's (NYSE:BMY) dividend will be increasing from last year's payment of the same period to $0.57 on 1st of May. This will take the annual payment to 3.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Bristol-Myers Squibb

Bristol-Myers Squibb's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Bristol-Myers Squibb's dividend made up quite a large proportion of earnings but only 40% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 156.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Bristol-Myers Squibb Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from $1.36 total annually to $2.28. This works out to be a compound annual growth rate (CAGR) of approximately 5.3% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Bristol-Myers Squibb has seen EPS rising for the last five years, at 38% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Bristol-Myers Squibb is not retaining those earnings to reinvest in growth.

We Really Like Bristol-Myers Squibb's Dividend

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

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Bristol-Myers Squibb that investors should know about before committing capital to this stock. Is Bristol-Myers Squibb not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.