Bread Financial Holdings, Inc. (NYSE:BFH) will pay a dividend of $0.21 on the 12th of September. This means the annual payment will be 1.5% of the current stock price, which is lower than the industry average.
Bread Financial Holdings' Payment Expected To Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end.
Bread Financial Holdings has a good history of paying out dividends, with its current track record at 9 years. While past data isn't a guarantee for the future, Bread Financial Holdings' latest earnings report puts its payout ratio at 14%, showing that the company can pay out its dividends comfortably.
Over the next 3 years, EPS is forecast to expand by 38.5%. Analysts estimate the future payout ratio will be 12% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Bread Financial Holdings
Bread Financial Holdings' Dividend Has Lacked Consistency
Looking back, Bread Financial Holdings' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was $2.08 in 2016, and the most recent fiscal year payment was $0.84. Doing the maths, this is a decline of about 9.6% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend's Growth Prospects Are Limited
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. However, Bread Financial Holdings' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On Bread Financial Holdings' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Bread Financial Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Bread Financial Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.