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Bread Financial Holdings, Inc.'s (NYSE:BFH) investors are due to receive a payment of $0.21 per share on 13th of June. This means the dividend yield will be fairly typical at 1.8%.
We've discovered 2 warning signs about Bread Financial Holdings. View them for free.
Bread Financial Holdings' Payment Expected To Have Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.
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 15%, showing that the company can pay out its dividends comfortably.
Looking forward, EPS is forecast to rise by 44.0% over the next 3 years. 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.
View our latest analysis for Bread Financial Holdings
Bread Financial Holdings' Dividend Has Lacked Consistency
Bread Financial Holdings has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $2.08 in 2016 to the most recent total annual payment of $0.84. This works out to be a decline of approximately 9.6% per year over that time. 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.
Dividend Growth Is Doubtful
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's not great to see that Bread Financial Holdings' earnings per share has fallen at approximately 6.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Bread Financial Holdings has been making. We don't think Bread Financial Holdings is a great stock to add to your portfolio if income is your focus.