Bank of America is currently trading at $12.90 a share and is paying a dividend of $1.28. This equates to a dividend yield of almost 10% which is higher than Bank of America’s earnings per share. The dividend payout ratio is way too high. I am expecting that Bank of America will either cut or eliminate its dividend altogether. BAC cannot pay out such a high percentage of its earnings in the form of dividends when the company is in need of capital. I think that when they announce the dividend cut, the stock will sink further as investors holding the stock for the dividend payout will sell. As stated previously, I sold the majority of my Bank of America shares because of dilution concerns. Dividends may also be in trouble at Morgan Stanley with a yield of 7% and Deutsche Bank yielding 12%.
Expecting a dividend cut
December 23, 2008 by 1 Comment