One of the many reasons to own BB&T's (BBT 1.22%) stock is the size, reliability, and future growth potential of its dividend. The charts below capture this opportunity from three different perspectives.
The first chart shows the history of BB&T's quarterly dividend per share:
Data source: YCharts.com. Chart by author.
One point to take away from this chart is the interruption caused by the financial crisis, which should be self-evident. After Lehman Brothers failed in 2008, most big banks slashed their dividends in order to accumulate capita, which could then be used to offset credit losses. These cuts still haunt banks like Bank of America and Citigroup, neither of which has been able to scale up its dividends to anywhere near 2007 levels, but BB&T's quarterly payout has mounted a strong comeback. Since temporarily settling at $0.15 per share in the aftermath of the crisis, BB&T's quarterly payout has more than doubled to $0.28 per share currently.
Another point to take away from the first chart is the fact that BB&T has consistently increased its quarterly payout -- with, of course, the financial crisis serving as the principal exception. This is good news for shareholders, as a continuation of this trend will fatten investors' pockets for years to come.
The second chart illustrates BB&T's payout ratio, the percentage of net income it distributed to shareholders in 2014:
Data source: BB&T. Chart by author.
Most banks strive to pay out a third of their earnings to shareholders, leaving the remaining two-thirds to be split roughly evenly between retained earnings and share buybacks.
BB&T hits this on the head when it comes to dividends. In 2014, it distributed 30% of its earnings to shareholders.
It's lagged, however, when it comes to share buybacks. But 2014 was an anomaly in this regard, as BB&T retained its capital to help finance the purchases of The Bank of Kentucky and Susquehanna Bancshares, as well as Citigroup's Texas-based branches.
Going forward, it seems safe for BB&T's shareholders to assume that the bank will restart its buyback engine. It should have already done so, in fact, as its board approved $820 million worth of buybacks starting in the current quarter.
Finally, the third chart compares BB&T's dividend yield -- its annual payout divided by its share price -- to its competitors:
Data source: YCharts.com. Chart by author.
BB&T leads the pack in this regard. Its current dividend yield is a respectable 2.9%, slightly ahead of companies like Wells Fargo and well above Bank of America and Citigroup, among others.
In sum, if you're on the hunt for a great bank stock that seems likely to raise its dividend consistently over the coming years, you could do a lot worse than BB&T.
