Bank of America Corporation's (NYSE:BAC) dividend will be increasing from last year's payment of the same period to $0.24 on 29th of December. This makes the dividend yield about the same as the industry average at 3.6%.

Check out our latest analysis for Bank of America

Bank of America's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Having distributed dividends for at least 10 years, Bank of America 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 25%, which means that Bank of America would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 2.9%. Analysts forecast the future payout ratio could be 32% over the same time horizon, which is a number we think the company can maintain.

Bank of America Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $0.04 in 2013 to the most recent total annual payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Bank of America has impressed us by growing EPS at 11% per year over the past five years. Bank of America definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Bank of America Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bank of America is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Bank of America (of which 1 is a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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.