Monthly Dividend Stock In Focus: Banco Bradesco S.A. - Sure Dividend

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Monthly Dividend Stock In Focus: Banco Bradesco S.A.

Published on July 29th, 2021 by Bob Ciura

Most stocks that pay dividends, do so on a quarterly, semi-annual, or annual basis. But there is a small group of stocks that pay their dividends on a monthly basis. Monthly dividend stocks are naturally appealing for investors, as they make 12 dividend payouts to shareholders each year.

Monthly dividend stocks are equally rare when it comes to international dividend stocks. Banco Bradesco S.A. (BBD) is a monthly dividend stock with a yield above 4%.

You can download our full Excel list of 49 monthly dividend stocks (along with important metrics like dividend yields and payout ratios) by clicking on the link below:


Of course, investors should exercise caution when it comes to monthly dividend stocks. As always, investors should evaluate the company based on its business model strength, competitive advantages, and growth potential before buying shares.

This article will discuss Banco Bradesco in greater detail.

Business Overview

Banco Bradesco is a financial services company based in Brazil. It offers various banking products and financial services to individuals, corporations, and businesses in Brazil and internationally. The company’s two main segments are banking and insurance, including checking and savings accounts, demand deposits, time deposits, as well as accident and property insurance products and investment products. The company generates around $20 billion in annual revenue.

Last year was very difficult for Banco Bradesco, as the global economy was negatively impacted by the coronavirus pandemic. Fortunately, 2021 has been a year of recovery for banks such as Banco Bradesco, which are benefiting from the return to economic growth.

Source: Investor Presentation

On August 4th, 2021, Banco Bradesco reported its Q2 results. The banking segment’s net interest income was $3.03 billion for the quarter, representing 1.0% growth yearoveryear. Income from insurance declined 57.5% yearoveryear due to operating cost efficiencies, due to higher expenses as a result of the effects of COVID19, which remained strong in Brazil during the quarter. The company’s client base remained rather stable during the quarter, nonetheless.

Net income ended at $1.21 billion, 63.2% higher than Q22020, due to the company suffering nonrecurring expenses last year amid the pandemic outbreak. However, quarteroverquarter, net income declined by 3.0% due to the insurance segment’s weak performance. EPS for the quarter was $0.13, relatively stable quarteroverquarter.

We’ll now take a look at Banco Bradesco’s growth prospects in detail.

Growth Prospects

Banco Bradesco’s earnings-per-share growth has been improving gradually in constant currency, but has shown as flat or reduced over the years when converted in USD, due to BRL/USD depreciation. Foreign exchange risk is a major consideration for U.S. investors when buying international stocks.

That said, the company has been successful in generating organic growth. In Q2, the company reported it expanded its loan portfolio to $140.0 billion, a 9.9% growth year-over-year, or 3.0% quarter-over-quarter.

Continued loan growth should support future growth for BBD.

Source: Investor Presentation

Additionally, its client base in its AGORA digital investment brokerage app grew by nearly 50% to 672.9K, with $13.92 billion of invested funds.

Banco Bradesco possesses competitive advantages that should fuel its expected growth, primarily its size and industry position. The company’s Basel ratio currently stands at 14.1% (the minimum capital ratio banks must maintain to ensure solvency is 8%), which makes for a healthy capital structure.

Liquidity coverage stands at 156%, also ample to ensure available funds if needed. However, with the economic struggles facing Brazil and the currency risk posed by the strong U.S. dollar, we expect flat EPS over the next five years for BBD.

Fortunately, despite the lack of earnings growth we view the company’s high dividend payout as secure, given the comfortable dividend payout ratio.

Dividend Analysis

We continue to expect FY2021 dividends of $0.24 per share, reflecting the company’s historical dividend policy. With a current share price of ~$4.34, the stock has a 5.5% dividend yield. BBD is an attractive high dividend stock, particularly as the S&P 500 Index yields just 1.4% on average right now.

And, BBD stock is even more appealing with its monthly dividend. Dividend payments are made on a monthly basis, which is quite rare for an international company. The company usually pays around $0.0036 per share each month, accompanied by two special dividends per year, which define the final amount.

It is worth noting that the company had consecutively grown its dividend annually from 2012 to 2019, but again, FX changes have distorted that amount.

When it comes to dividend safety, we expect the company to report full-year EPS of $0.52. This means the company has a projected dividend payout ratio of ~46% for 2021, a healthy payout ratio that indicates the dividend is sustainable, barring a deep and severe economic downturn in Brazil.

While Banco Bradesco’s dividend is not consistent and will continue to vary based on the company’s underlying results and FX changes, a base level (0.0036/month) should be considered quite safe, being wellcovered by the company’s cash from operations. The company continued to pay its base monthly rate even under the Great Financial Crisis, despite its financials suffering along with the rest of its sector.

Final Thoughts

Banco Bradesco struggled last year due to the coronavirus pandemic, but the company’s financial results have bounced back in 2021. Banco Bradesco is also a wellmanaged financial services company. In its original Sao Paolo listing, the stock has delivered investors positive returns over the years when valued in constant currency.

However, for American investors, the company’s underlying growth has been wiped out by the nonstop depreciation of BRL/USD. Currency risk is an important factor when it comes to international stocks, and BBD is a prime example.

Shares currently yield above 5% and make monthly dividend payments, both of which make the stock appealing for income investors. And with a payout ratio below 50%, the dividend payout appears secure. At the same time, the company poses various risks including foreign exchange and economic conditions in Brazil.

Therefore, only risk-tolerant income investors should consider buying BBD stock.

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