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


Updated on Spetember 8th, 2024 by Felix Martinez

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 projected 2023 yield of ~1.5%.

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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 $19 billion in annual revenue.

The 2020 COVID-19 pandemic year was very difficult for Banco Bradesco, as the global economy was negatively impacted by the coronavirus pandemic. Fortunately, 2021 was a year of recovery for banks such as Banco Bradesco, which have benefited from the return to economic growth.

Source: Investor Presentation

On August 5th, 2024, Banco Bradesco reported its Q2 results. Bradesco’s transformation continues, with 2Q24 results reflecting stronger operational traction and strategic changes. The loan portfolio grew, focusing on Micro, Small, and Medium-Sized Enterprises (MSME) and individuals. At the same time, delinquencies declined due to improved credit ratings and better collection processes, normalizing the cost of credit. Client net interest income (NII) rebounded, with fee and commission income recovering as the bank shifted to digital channels and improved operational efficiency.

Recurring net income reached $0.84 billion, with a return on average equity (ROAE) of 11.4%, supported by lower loan loss provisions and higher income from fees and insurance. Bradesco continues to implement its strategic plan, focusing on digital transformation, customer service enhancements, and sustainability, with 1.8 million new customers added in 1H24 and a commitment to allocate $44.66 billion to socio-environmental assets by 2025. The 2023 Integrated and ESG Reports reaffirm its commitment to transparency and sustainability.

We are forecasting FY2024 EPS of $0.35, assuming higher net interest income due to interest rates. Still, we remain cautious due to the possibility of the Brazilian Real depreciating against the dollar.

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. Continued loan growth should support future growth for BBD.

Source: Investor Presentation

Banco Bradesco possesses competitive advantages that should fuel its expected growth, primarily its size and industry position along with its healthy capital structure. Liquidity coverage is also ample enough 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 dividend payout as secure, given the comfortable dividend payout ratio of ~13%.

Dividend Analysis

We are expecting FY2024 dividends of $0.05 per share. With a current share price of ~$2.81, the stock has a 1.7% dividend yield. While BBD is not a high dividend stock, it still yields roughly what the S&P 500 Index currently does.

Furthermore, 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.

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 $0.35. This means the company has a projected dividend payout ratio of ~13% for 2024, 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, the current level should be considered quite safe, being well-covered by the company’s cash from operations.

Final Thoughts

Banco Bradesco struggled due to the coronavirus pandemic, but the company recovered a bit in 2021 and continues to generate profits today. Banco Bradesco is also a well-managed financial services company.

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

Shares currently yield ~1.7% and make monthly dividend payments, making the stock an interesting option for income investors despite its mediocre dividend yield. With a payout ratio of 13%, 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 a position in BBD stock.

Don’t miss the resources below for more monthly dividend stock investing research.

And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.

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