Will Bank of America Raise Its Dividends in 2017?



BAC’s dividends

Bank of America (BAC) boosted its dividends by 50% to $0.075 after it cleared the Federal Reserve’s 2016 stress tests in June 2016. In 3Q16, it began a series of stock buybacks worth $5 billion that would occur over the next 12 months.

BAC’s dividend became effective in 3Q16. Unlike many of its peers (XLF), who have raised their dividends annually since 2011, Bank of America has boosted its quarterly payout only once, in 2014.

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The Fed’s approval is important for investors who’ve been disappointed with the bank’s low payout ratio. BAC 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 Bank of America has a long way to go. Its current dividend of $0.075 is much lower than its dividend of $0.64 before the financial crisis.

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

Although Bank of America’s balance sheet is smaller than JPMorgan’s, it has $16 billion worth of shareholder equity. Despite this, it’s raised its dividend only twice since 2011, while JPMorgan has raised its dividend every year. Bank of America CEO Brian Moynihan hopes that President-elect Donald Trump will relax the Dodd-Frank Act so that the company can raise its dividend further.


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