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Bank of America Declares a Quarterly Dividend

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Bank of America (BAC) announced a quarterly dividend of $0.075 for 4Q16 on January 26, 2017. This dividend will be payable to shareholders of record as of March 3, 2017, and it will be paid on March 31.

Bank of America boosted its dividend by 50% to $0.075 after it cleared the Federal Reserve’s yearly stress tests in June 2016. It will also buy back stock worth $5 billion over the 12 months that started in 3Q16.

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Bank of America failed three out of five earlier stress tests, the worst performance among major US banks. Its dividend will be effective from 3Q16 onward. Unlike many of its peers, who have raised their dividends annually since 2011, Bank of America has boosted its quarterly payout only once, in 2014.

The Fed’s approval is important for investors who have been disappointed by the bank’s (XLF) low payout ratio. Bank of America has been under pressure to increase its dividend payout for some time now. Its banking peers have already restored their dividends to pre-recession levels, but BAC has a long way to go. Its current dividend of $0.075 is much lower than its level of $0.64 before the crisis. Bank of America’s payout ratio is expected to rise to 49% from 36%.

While the magnitude of Bank of America’s capital plan is at par with peers (WFC) Citigroup (C) and JPMorgan Chase (JPM), its dividend yields are significantly lower.

In 2016, the company repurchased $5.1 billion in common stock and paid $2.6 billion in dividends to its shareholders.

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