Bank of America’s Lewis says dividend is OK -- for now
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
Despite a dismal first-quarter earnings report today, Bank of America Corp. offered shareholders at least one good reason to hang on to their stock: CEO Ken Lewis suggested the bank sees no need to cut its dividend payout.
While rivals including Citigroup Inc., Wachovia Corp., Washington Mutual Inc., National City Corp. and others have slashed their dividends this year to conserve capital, Lewis, pictured, told investors on the bank’s earnings conference call that ‘we have not changed our philosophy about the dividend.’
How good a guarantee is that? Don’t count those checks before they actually land in your mailbox, because Lewis quickly added this caveat about the payout: ‘If the economy worsens dramatically from our outlook over the next few quarters, resulting in a prolonged recessionary environment, we would do what we think prudent to manage capital.’
Still, Lewis’ relative optimism about the dividend may have helped support the stock price today in the face of the bank’s 77% plunge in first-quarter profit. B of A shares ended down 95 cents, or 2.5%, at $37.61. By contrast, the market hacked 8.1% off Wachovia’s share price on April 14 when it announced a 41% dividend cut and new stock sales to raise capital.
B of A’s annual dividend payout is $2.56 a share. That gives the stock a lofty yield of 6.8% at today’s closing stock price -- a sign the market has substantial doubts the payout will be sustained. The average yield of the 24 major banks in the BKX stock index is 5.4%.
Moody’s Investors Service has doubts, too: The credit-rating firm today downgraded B of A’s long-term senior debt to Aa2 from Aa1, in part citing the company’s dividend outlays, which it labeled a ‘heavy burden.’
Posted April 21, 2008