The board of Bendigo and Adelaide Bank Limited (ASX:BEN) has announced that it will pay a dividend of A$0.30 per share on the 31st of March. Based on this payment, the dividend yield will be 5.8%, which is fairly typical for the industry.

View our latest analysis for Bendigo and Adelaide Bank

Bendigo and Adelaide Bank's Earnings Will Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time.

Bendigo and Adelaide Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but Bendigo and Adelaide Bank's payout ratio of 74% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 3.8% over the next 3 years. Analysts forecast the future payout ratio could be 72% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was A$0.66, compared to the most recent full-year payment of A$0.63. Payments have been decreasing at a very slow pace in this time period. 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.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Bendigo and Adelaide Bank has been growing its earnings per share at 5.4% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Bendigo and Adelaide Bank's Dividend

Overall, a consistent dividend is a good thing, and we think that Bendigo and Adelaide Bank has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Bendigo and Adelaide Bank that you should be aware of before investing. Is Bendigo and Adelaide Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.