Bendigo and Adelaide Bank Limited (ASX:BEN) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of September to A$0.32. This will take the annual payment to 6.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Bendigo and Adelaide Bank

Bendigo and Adelaide Bank's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Bendigo and Adelaide Bank has a long history of paying out a part of its earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Bendigo and Adelaide Bank's payout ratio of 69% is a good sign as this means that earnings decently cover dividends.

Looking forward, earnings per share is forecast to fall by 3.1% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 72% over the same time horizon, which is in the range that makes us comfortable with the sustainability of the dividend. historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of A$0.60 in 2013 to the most recent total annual payment of A$0.64. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Bendigo and Adelaide Bank May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Unfortunately, Bendigo and Adelaide Bank's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.



In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Bendigo and Adelaide Bank is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Bendigo and Adelaide Bank that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.