Assessing the Sustainability and Growth of Bank of America Corp's Dividends
Bank of America Corp (BAC, Financial) recently announced a dividend of $0.24 per share, payable on 2024-03-29, with the ex-dividend date set for 2024-02-29. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Bank of America Corp's dividend performance and assess its sustainability.
What Does Bank of America Corp Do?
Bank of America is one of the largest financial institutions in the United States, with more than $2.5 trillion in assets. It is organized into four major segments: consumer banking, global wealth and investment management, global banking, and global markets. Bank of America's consumer-facing lines of business include its network of branches and deposit-gathering operations, retail lending products, credit and debit cards, and small-business services. The company's Merrill Lynch operations provide brokerage and wealth-management services, as does its private bank. Wholesale lines of business include investment banking, corporate and commercial real estate lending, and capital markets operations. Bank of America has operations in several countries but is primarily U.S.-focused.
A Glimpse at Bank of America Corp's Dividend History
Bank of America Corp has maintained a consistent dividend payment record since 1986. Dividends are currently distributed on a quarterly basis. Bank of America Corp has increased its dividend each year since 2009. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 15 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Bank of America Corp's Dividend Yield and Growth
As of today, Bank of America Corp currently has a 12-month trailing dividend yield of 2.65% and a 12-month forward dividend yield of 2.78%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Bank of America Corp's annual dividend growth rate was 8.50%. Extended to a five-year horizon, this rate increased to 10.60% per year. And over the past decade, Bank of America Corp's annual dividends per share growth rate stands at an impressive 31.70%.
Based on Bank of America Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Bank of America Corp stock as of today is approximately 4.39%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Bank of America Corp's dividend payout ratio is 0.30.
Bank of America Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Bank of America Corp's profitability 6 out of 10 as of 2023-12-31, suggesting fair profitability. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Bank of America Corp's growth rank of 6 out of 10 suggests that the company has a fair growth outlook.
Revenue is the lifeblood of any company, and Bank of America Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Bank of America Corp's revenue has increased by approximately 7.90% per year on average, a rate that outperforms approximately 55.63% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Bank of America Corp's earnings increased by approximately 21.10% per year on average, a rate that outperforms approximately 71.27% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 6.80%, which outperforms approximately 43.8% of global competitors.
Concluding Insights on Bank of America Corp's Dividend Prospects
In conclusion, Bank of America Corp's consistent dividend history, robust yield, and impressive growth rates underscore its attractiveness to dividend-seeking investors. The company's prudent payout ratio and solid profitability provide a cushion for sustaining dividend payments. Furthermore, the favorable growth metrics signal a positive outlook for future earnings and dividend expansion. As Bank of America Corp navigates the financial landscape, its dividend policy will likely remain a focal point for investors evaluating the stock's long-term value. Will Bank of America Corp continue to reward shareholders with growing dividends, or will market dynamics prompt a reassessment of its dividend strategy? Value investors may find Bank of America Corp an interesting case study in balancing income generation with growth potential.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
