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The board of BOK Financial Corporation (NASDAQ:BOKF) has announced that it will be increasing its dividend on the 24th of November to US$0.53. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.
BOK Financial's Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, BOK Financial was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to fall by 22.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 29%, which we are pretty comfortable with and we think is feasible on an earnings basis.
BOK Financial Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2011, the first annual payment was US$1.00, compared to the most recent full-year payment of US$2.12. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that BOK Financial has grown earnings per share at 21% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Our Thoughts On BOK Financial's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While BOK Financial is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for BOK Financial you should be aware of, and 1 of them is a bit concerning. We have also put together a list of global stocks with a solid dividend.
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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