Banco Bradesco S.A. (BVMF:BBDC3, BVMF:BBDC4) traded in a narrow range on Thursday as investors focused on an upcoming dividend-related payout that has created a slight yield advantage for common shares over preferreds. The bank’s board approved a R$3.5 billion interim interest-on-equity (JCP) distribution, with a record date of July 3 and an ex-rights date of July 6.
According to Reuters calculations, the payout translates to R$0.315359035 per common share and R$0.346894939 per preferred share, based on gross values. At Thursday’s closing prices—R$15.74 for common (BBDC3) and R$18.12 for preferred (BBDC4)—the gross yield on price stands at 2.00% for common shares versus 1.91% for preferreds. After taxes (assuming a 17.5% withholding rate), the net yields are 1.65% and 1.58%, respectively.
The preferred stock trades at a 15.1% premium to the common, reflecting its higher dividend policy. Preferred shares are entitled to a 10% higher dividend than common shares, which is reflected in the larger per-share JCP amount. However, because common shares trade at a lower price, the yield per real invested is marginally higher for common holders.
Bradesco’s capital structure grants common shareholders voting rights and full tag-along rights in the event of a change of control. Preferred shareholders, while lacking voting rights, benefit from a 10% dividend premium and 80% tag-along rights. This structure has historically led to a persistent spread between the two share classes.
The interim net JCP payment of 1.58% of price for BBDC4 exceeds the stock’s year-to-date price gain of 1.23%, as reported by InfoMoney. This puts the focus squarely on the ex-rights date for income-oriented funds and local retail investors, rather than on the stock’s modest intraday movement.
Bernard Zambonin, equity research analyst at DM Martins Research, noted in a Seeking Alpha post that Bradesco’s return on average equity (ROAE) has moved back above the Selic rate, Brazil’s benchmark interest rate. He described the bank’s high-single-digit dividend and JCP yield as a compelling incentive for investors to remain patient. However, the Selic rate remains elevated at 14.25%, according to Trading Economics, keeping pressure on banks to demonstrate profit growth that outpaces the risk-free rate.
Market sentiment appears cautiously optimistic. Investing.com’s 12-month average price target for BBDC4 stands at R$22.83, with a high of R$26 and a low of R$19. At the current price of R$18.12, the average target implies nearly 26% upside potential, excluding dividends. Bradesco is scheduled to report its second-quarter earnings on July 29.
The JCP payout, while modest in absolute terms, underscores Bradesco’s commitment to returning capital to shareholders. With the Selic rate still high, the bank’s ability to sustain profitability above that threshold will be a key focus for analysts and investors in the coming quarters.
