Bendigo and Adelaide Bank Limited (ASX:BEN) stock is about to trade ex-dividend in 4 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, Bendigo and Adelaide Bank investors that purchase the stock on or after the 4th of September will not receive the dividend, which will be paid on the 29th of September.
The company's next dividend payment will be AU$0.32 per share. Last year, in total, the company distributed AU$0.64 to shareholders. Calculating the last year's worth of payments shows that Bendigo and Adelaide Bank has a trailing yield of 6.8% on the current share price of A$9.44. If you buy this business for its dividend, you should have an idea of whether Bendigo and Adelaide Bank's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Bendigo and Adelaide Bank paid out 69% of its earnings to investors last year, a normal payout level for most businesses.
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.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Bendigo and Adelaide Bank's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Bendigo and Adelaide Bank has delivered 0.6% dividend growth per year on average over the past 10 years.
To Sum It Up
Is Bendigo and Adelaide Bank worth buying for its dividend? Bendigo and Adelaide Bank's earnings per share have been essentially flat, and the company is paying out more than half of its earnings as dividends to shareholders. Bendigo and Adelaide Bank doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that being said, if you're still considering Bendigo and Adelaide Bank as an investment, you'll find it beneficial to know what risks this stock is facing. In terms of investment risks, we've identified 1 warning sign with Bendigo and Adelaide Bank and understanding them should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.