Fifth Third Bancorp's (NASDAQ:FITB) dividend will be increasing from last year's payment of the same period to $0.37 on 15th of October. Based on this payment, the dividend yield for the company will be 3.4%, which is fairly typical for the industry.

See our latest analysis for Fifth Third Bancorp

Fifth Third Bancorp's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having distributed dividends for at least 10 years, Fifth Third Bancorp has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 44%, which means that Fifth Third Bancorp would be able to pay its last dividend without pressure on the balance sheet.

Looking forward, EPS is forecast to rise by 17.5% over the next 3 years. The future payout ratio could be 43% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Fifth Third Bancorp Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.48 in 2014 to the most recent total annual payment of $1.48. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Fifth Third Bancorp hasn't seen much change in its earnings per share over the last five years. Growth of 1.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

We Really Like Fifth Third Bancorp's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Fifth Third Bancorp that investors should know about before committing capital to this stock. Is Fifth Third Bancorp 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.