Bendigo and Adelaide Bank Limited (ASX:BEN) has announced that it will be increasing its periodic dividend on the 31st of March to A$0.29, which will be 9.4% higher than last year's comparable payment amount of A$0.265. This makes the dividend yield about the same as the industry average at 5.4%.

See our latest analysis for Bendigo and Adelaide Bank

Bendigo and Adelaide Bank's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Bendigo and Adelaide Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Bendigo and Adelaide Bank's payout ratio of 72% is a good sign as this means that earnings decently cover dividends.

The next 3 years are set to see EPS grow by 15.0%. Analysts forecast the future payout ratio could be 68% over the same time horizon, which is a number we think the company can maintain. 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$0.53. Doing the maths, this is a decline of about 1.2% 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.

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. In the last five years, Bendigo and Adelaide Bank's earnings per share has shrunk at approximately 4.9% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.



In Summary

In summary, while it's always good to see the dividend being raised, we don't think Bendigo and Adelaide Bank's payments are rock solid. While Bendigo and Adelaide Bank is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 3 warning signs for Bendigo and Adelaide Bank you should be aware of, and 2 of them shouldn't be ignored. 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.

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