Bread Financial Holdings, Inc.'s (NYSE:BFH) investors are due to receive a payment of $0.21 per share on 15th of March. This means that the annual payment will be 2.4% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Bread Financial Holdings' stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Bread Financial Holdings

Bread Financial Holdings' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Bread Financial Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 49.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 9.8%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Bread Financial Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of $2.08 in 2017 to the most recent total annual payment of $0.84. The dividend has fallen 60% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's not great to see that Bread Financial Holdings' earnings per share has fallen at approximately 2.8% per year over the past five years. 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.

Our Thoughts On Bread Financial Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bread Financial Holdings' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Bread Financial Holdings is a great stock to add to your portfolio if income is your focus.