Bread Financial Holdings, Inc. (NYSE:BFH) will pay a dividend of $0.21 on the 13th of December. This means that the annual payment will be 1.7% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Bread Financial Holdings

Bread Financial Holdings' Earnings Will Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Bread Financial Holdings has a good history of paying out dividends, with its current track record at 8 years. While past data isn't a guarantee for the future, Bread Financial Holdings' latest earnings report puts its payout ratio at 8.5%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to fall by 21.4%. However, as estimated by analysts, the future payout ratio could be 12% over the same time period, which we think the company can easily maintain.

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 dividend has gone from $2.08 total annually to $0.84. This works out to a decline of approximately 60% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Come By

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. In the last five years, Bread Financial Holdings' earnings per share has shrunk at approximately 9.3% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

In Summary

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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Bread Financial Holdings (1 is significant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.