Be Sure To Check Out Bank of America Corporation (NYSE:BAC) Before It Goes Ex-Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bank of America Corporation (NYSE:BAC) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Bank of America investors that purchase the stock on or after the 1st of December will not receive the dividend, which will be paid on the 30th of December.
The company's next dividend payment will be US$0.22 per share. Last year, in total, the company distributed US$0.88 to shareholders. Based on the last year's worth of payments, Bank of America stock has a trailing yield of around 2.3% on the current share price of $37.7. If you buy this business for its dividend, you should have an idea of whether Bank of America's dividend is reliable and sustainable. 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.
Check out our latest analysis for Bank of America
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Bank of America's payout ratio is modest, at just 27% 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.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Bank of America's earnings per share have been growing at 16% a year for the past 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 36% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Bank of America an attractive dividend stock, or better left on the shelf? Companies like Bank of America that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Bank of America appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
While it's tempting to invest in Bank of America for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Bank of America you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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