{"id":50654,"date":"2023-08-20T01:39:24","date_gmt":"2023-08-20T05:39:24","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/bank-of-america-buy-before-it-goes-ex-dividend-nysebac\/"},"modified":"2023-08-20T01:39:27","modified_gmt":"2023-08-20T05:39:27","slug":"bank-of-america-buy-before-it-goes-ex-dividend-nysebac","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=50654","title":{"rendered":"Bank of America: Buy Before It Goes Ex-Dividend (NYSE:BAC)"},"content":{"rendered":"
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Brian Moynihan<\/p>\n<\/figcaption><\/figure>\n

Bank of America<\/strong> (NYSE:BAC<\/span>) recently announced a 9% dividend hike. The holder of record date for the stock is September 1, and the ex-dividend date is August 31. If you wish to grab Bank of America\u2019s upcoming dividend, you\u2019ll need to own the stock before August 31.<\/span><\/p>\n

This may be a good time to buy Bank of America ahead of its dividend payout. The company\u2019s stock got beaten down recently when treasury yields spiked (i.e. their prices declined), leading to concerns about banks\u2019 balance sheets. BAC has about $106 billion in unrealized securities losses, so this isn\u2019t an unreasonable concern to have in principle.<\/p>\n

However, the level of concern may be a little overblown. Bank of America does have a lot of unrealized losses, but its liquidity is quite good. Its highly liquid assets make up about 50% of its deposit base, even when you adjust them down to fair value. So, the bank could survive having 50% of its depositors withdraw their money in a short span of time. Additionally, the bank\u2019s <\/span>liquidity coverage ratio is 119%, which is above the 100% requirement.<\/span><\/p>\n

Given Bank of America\u2019s high liquidity, it is most likely not at risk of a failure. At the same time, the declining share price means that if you buy the stock today, you will enjoy a higher yield than you would have had you bought it at most points in the last few years. Therefore, BAC stock is a relatively appealing buy at today\u2019s prices.<\/p>\n

Bank of America – Dividend Safety<\/h2>\n

Since we are primarily interested in Bank of America\u2019s dividend here, it makes sense to think about how safe the payout is. There are several metrics we can look at to gauge that. The first metric we can look at is the payout ratio (dividends paid divided by earnings). According to Seeking Alpha Quant, BAC\u2019s payout ratio is 25.3%, which is pretty low and sustainable. That\u2019s a good thing.<\/p>\n

However, bank earnings tend to vary a lot with the state of the economy. During the 2008\/2009 financial crisis, BAC\u2019s earnings declined 73%. Many other banks\u2019 earnings went negative in the same period. In order for BAC to continue paying its dividend at its current level, it will need to be strong enough to withstand a future recession. While few economists expect the next recession to be a severe one, most do expect there to be a recession in one form or another. So, it helps to look at BAC\u2019s overall financial strength.<\/p>\n

We can assess that using a framework known as CAMELS. CAMELS is an acronym that stands for:<\/p>\n