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

Bristol-Myers Squibb Company (NYSE:BMY) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of May to $0.57. This will take the annual payment to 3.3% 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 Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Bristol-Myers Squibb was paying out 74% of earnings, but a comparatively small 40% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 156.7% over the next year. 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

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was $1.36 in 2013, and the most recent fiscal year payment was $2.28. This means that it has been growing its distributions at 5.3% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

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. We are encouraged to see that Bristol-Myers Squibb has grown earnings per share at 37% per year over the past five years. However, Bristol-Myers Squibb isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

Bristol-Myers Squibb Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bristol-Myers Squibb is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Bristol-Myers Squibb that you should be aware of before investing. Is Bristol-Myers Squibb 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.