Bread Financial Holdings, Inc.'s (NYSE:BFH) investors are due to receive a payment of $0.21 per share on 13th of June. This means the dividend yield will be fairly typical at 1.8%.

We've discovered 2 warning signs about Bread Financial Holdings. View them for free.

Bread Financial Holdings' Payment Expected To Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

Bread Financial Holdings has a good history of paying out dividends, with its current track record at 9 years. While past data isn't a guarantee for the future, Bread Financial Holdings' latest earnings report puts its payout ratio at 15%, showing that the company can pay out its dividends comfortably.

Looking forward, EPS is forecast to rise by 44.0% over the next 3 years. Analysts estimate the future payout ratio will be 12% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.NYSE:BFH Historic Dividend May 2nd 2025

View 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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of $2.08 in 2016 to the most recent total annual payment of $0.84. This works out to be a decline of approximately 9.6% per year over that time. 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

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's not great to see that Bread Financial Holdings' earnings per share has fallen at approximately 6.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. 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.

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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Bread Financial Holdings has been making. We don't think Bread Financial Holdings is a great stock to add to your portfolio if income is your focus.

Story Continues

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. For instance, we've picked out 2 warning signs for Bread Financial Holdings that investors should take into consideration. 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.

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