Bank of America Offers Shareholders Six Consecutive Annual Dividend Hikes (BAC)
By: Ned Piplovic,
While enduring considerable financial troubles for several years after the 2008 financial calamity, the Bank of America Corporation (NYSE:BAC) has embarked on path to recovery and has rewarded its shareholders with annual dividend hikes over the past six consecutive years.
Bank of America’s quarterly payout amount had reached $0.64 by mid-2007. However, the financial crisis in 2008 forced the bank to nearly eliminate its dividend distributions in the aftermath of the financial fallout.
Initially, the bank cut its quarterly dividend in half for the fourth-quarter distribution in 2008. However, that cut was just the beginning as the dividend payout dropped to $0.01 for the first quarter of 2009 and remained at that level for the subsequent 22 quarters.
Fortunately, the company resumed its annual dividend hikes in 2014. After six consecutive annual dividend hikes, the total annual payout amount increased more than 10-fold. Although, the current annualized dividend amount has reached only 25% of the $2.40 actual annual payout distributed for 2007 – prior to the dividend cut in 2008.
Bank of America’s dividend yield is currently below the 3.18% simple average yield of the entire Financials sector. However, the BAC’s current yield is in line with the average yields of its peers in the banking industry segment.
The bank’s current dividend payout ratio 25% offers plenty of assurance that the company’s dividends are well covered by its earnings and that it should be able to extend its current streak of annual dividend hikes a while longer. Interested investors should purchase shares prior to the February 28, 2019 ex-dividend date. Claiming share ownership prior to that ex-dividend-date will ensure eligibility to receive the next round of dividend distributions on the pay date of March 29, 2019.
Bank of America Corporation (NYSE:BAC)
Based in Charlotte, North Carolina, and founded in 1904, the Bank of America Corporation offers the full spectrum of banking and financial products and services through four business segments. The Consumer Banking segment offers customary banking services, such as money market savings accounts, checking accounts, mortgages and loans, as well as credit and debit cards. In addition, the Consumer Banking segment offers its services through a network of approximately 4,500 financial centers and 16,000 Automated Teller Machines (ATMs). The Global Wealth & Investment Management segment – which includes the Merrill Lynch investment brokerage division – offers a full line of investment management, brokerage, banking, trust and retirement products and services. The Global Banking segment provides lending products and services, including commercial loans, leases and trade finance, as well as real estate and asset-based lending. This segment also provides treasury, working capital management, underwriting, merger-related and other advisory services. The Global Markets segment offers financing, securities clearing, settlement and custody services, as well as foreign exchange, risk management and fixed-income products.
The company’s current $0.15 quarterly dividend distribution is 25% above the $0.12 quarterly payout from the same period last year. This new quarterly payout amount corresponds to a $0.60 annualized dividend and a 2.1% forward dividend yield. The current yield outperformed the company’s own 1.4% five-year average yield by more than 55%. Furthermore, the bank’s current 2.1% yield is just marginally below the 2.15% simple average yield of BAC’s peers in the Money Center Banks industry segment.
Bank of America enhanced its annual dividend payout 15-fold since resuming its annual dividend hikes in 2014 to equal a 57% average annual growth rate. While that growth is impressive, it Is not very realistic, since it compares the current dividend payout with the nominal $0.01 quarterly dividend paid from 2008 to mid-2014.
However, even compared to the annualized payout from the last quarter of 2014, the current distribution has made substantial gains. Compared to that, the current annual dividend payout is still 200% higher than the 2014 annualized amount of $0.20, which corresponds to a still impressive average annual growth rate of nearly 25% per year.
While the dividend distribution continued to rise, BAC’s share price declined slightly to offset the dividend income gains and deliver to the company’s shareholders a 2.8% total loss for the past 12 months. However, the share price has been recovering quickly over the last 60 days. A continuation of that trend could lead the total returns back to levels near the 78% total return over the last five years or 166% over the past three years.
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