Bread Financial Holdings (NYSE:BFH) Has Announced A Dividend Of $0.21

The board of Bread Financial Holdings, Inc. (NYSE:BFH) has announced that it will pay a dividend on the 13th of June, with investors receiving $0.21 per share. Based on this payment, the dividend yield will be 1.7%, which is fairly typical for the industry.

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Bread Financial Holdings' Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Bread Financial Holdings has a good history of paying out dividends, with its current track record at 9 years. Using data from its latest earnings report, Bread Financial Holdings' payout ratio sits at 11%, an extremely comfortable number that shows that it can pay its dividend.

The next 3 years are set to see EPS grow by 44.0%. Analysts forecast the future payout ratio could be 12% over the same time horizon, which is a number we think the company can maintain.

Check out 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. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was $2.08, compared to the most recent full-year payment of $0.84. Doing the maths, this is a decline of about 9.6% per year. 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

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, Bread Financial Holdings' earnings per share has shrunk at approximately 7.0% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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.

Our Thoughts On Bread Financial Holdings' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Bread Financial Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Bread Financial Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated 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.