Bank of America (NYSE: BAC) increases dividend to US $ 0.21
The advice of Bank of America Corporation (NYSE: BAC) has announced that it will increase its dividend on September 24 to US $ 0.21. Despite this increase, the dividend yield of 1.9% is only a modest boost to returns for shareholders.
Bank of America dividend well covered by earnings
While return is important, another factor to consider regarding a company’s dividend is whether current payout levels are achievable. Based on the last payment, Bank of America was earning enough to cover the dividend, but free cash flow was not positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Next year is expected to see EPS increase by 4.2%. Assuming the dividend continues on recent trends, we think the payout ratio could reach 30% by next year, which is in a fairly sustainable range.
NYSE: Historical BAC Dividend August 22, 2021
Bank of America has a strong balance sheet
The company has a strong history of paying dividends with very little fluctuation. The first annual payment in the past 10 years was US $ 0.04 in 2011, and the most recent year’s payment was US $ 0.84. This means that he increased his distributions by 36% per year during this period. So, dividends have grown quite quickly, and what is even more impressive, they haven’t seen any noticeable decline during that time.
The dividend seems likely to increase
Investors might be attracted to the stock depending on the quality of its payment history. It is encouraging to see that Bank of America has increased its earnings per share by 16% per year over the past five years. The growth in EPS bodes well for the dividend, as does the low payout ratio the company is currently reporting.
Overall, it’s probably not a high-income stock, although the dividend is being increased. While the low payout ratio is a feature of redemption, this is offset by the minimum amount of money to cover the payouts. We would be a little cautious if we were relying on this security primarily for dividend income.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. However, there are other things for investors to consider when analyzing the performance of stocks. For example, we have chosen 1 warning sign for Bank of America that investors should be aware of before committing capital to this stock. We have also set up a list of global stocks with a solid dividend.
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