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Bank of America Corporation (NYSE:BAC) Passed Our Checks, And It's About To Pay A US$0.18 Dividend

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Simply Wall St
·3 min read
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Readers hoping to buy Bank of America Corporation (NYSE:BAC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 4th of March, you won't be eligible to receive this dividend, when it is paid on the 26th of March.

Bank of America's upcoming dividend is US$0.18 a share, following on from the last 12 months, when the company distributed a total of US$0.72 per share to shareholders. Based on the last year's worth of payments, Bank of America has a trailing yield of 2.1% on the current stock price of $34.71. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Bank of America has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Bank of America

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Bank of America's payout ratio is modest, at just 38% of profit.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Bank of America, with earnings per share up 6.4% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Bank of America has lifted its dividend by approximately 34% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Bank of America worth buying for its dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. In summary, Bank of America appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Ever wonder what the future holds for Bank of America? See what the 17 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.