Bristol-Myers Squibb Company (NYSE:BMY) has announced that it will be increasing its dividend from last year’s comparable payment on the 3rd of February to $0.62. This makes the dividend yield 4.3%, which is above the industry average.

View our latest analysis for Bristol-Myers Squibb

A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Even though Bristol-Myers Squibb isn’t generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 56%, which makes us pretty comfortable with the sustainability of the dividend.

Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2014, the dividend has gone from $1.44 total annually to $2.48. This implies that the company grew its distributions at a yearly rate of about 5.6% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The company’s investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren’t as good as they seem. Unfortunately, Bristol-Myers Squibb’s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company has been bring in plenty of cash to cover the dividend, but we don’t necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we’ve picked out 2 warning signs for Bristol-Myers Squibb that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.