Friday, March 21, 2014

Wall Street sticking with estimates of Bank of America's dividend

After Bank of America's performance in the Federal Reserve's annual stress test, analysts are investors are trying to read the tea leaves on what the Charlotte bank will do with its dividend.

The Fed published its results Thursday, showing that Bank of America would keep its capital levels above the regulatory minimum during a severe economic downturn. But the results came in below its big bank peers, and significantly below Bank of America's own internal projections.

Analysts have been predicting a significant increase to Bank of America's dividend, which has been stuck at a penny per share each quarter since the financial crisis. They're largely sticking to the prediction Friday, but saying the situation has become a bit more murky.

UPDATE: The Federal Reserve issued corrected stress test results on Friday, saying it miscalculated. The new figures knocked Bank of America's capital ratio from 6 percent to 5.9 percent, further clouding the picture.

Here's a sampling from research reports published Friday. Keep in mind, the consensus estimate was an increase in quarterly dividend to 5 cents per share.

  • KBW analysts are still predicting a quarterly dividend increase to about 5 cents per share. Their report says they don't like to pick out "losers" in the process because that could be "overly negative," but mentioned Bank of America in that category.
  • Barclays analysts also predicted a 5 cents per share quarterly dividend last week. But their report Friday says that level of payout might be in jeopardy. Using their models, Barclays calculated that Bank of America would fall below the 5 percent Tier 1 common equity ratio in the Fed's hypothetical scenario should they actually have that large a dividend. 
  • Credit Suisse analyst Moshe Orenbuch said in a note that Bank of America may have to revise and resubmit its capital plan based on Thursday's results, according to Bloomberg.
  • Wells Fargo analysts are predicting a $2 billion total common stock dividend payout in the coming year. That would be a rise from about $450 million this year, and represent a roughly 5 cent per quarter dividend based on Bank of America's outstanding share count.
Bank of America shares fell 2 percent in Friday trading, closing at $17.56.

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