Bold Bank of America (BAC) Maintains Dividend, Sets $3.75 Billion Buyback

Bank of America (BAC) is keeping its dividend of $0.64, putting to rest (for now) fears that the bank would cut it. BAC also announced a 75 million share repurchase program which is permitted to spend $3.75 billion over 12 to 18 months. The program replaces an expiring auhtorization program from 2007 for 200 million share.

BAC insists it has plenty of capital, and now it’s putting more money where it’s mouth is. BAC’s dividend has an 8.6% annual yield, and, as Tom Hutchison at Motley Fool noted in June, it’s now paying more in dividends than it earns:

Bank of America’s dividend is currently $2.56 per share, for an 8.6% yield. The 2008 consensus analyst estimate for the bank’s earnings is $2.66 per share. That means that to keep the dividend, the bank will have to pay out virtually everything it earns. Put another way, that’s nearly a 100% dividend payout ratio, compared with the bank’s historical payout ratio of 40% to 50%.

The consensus estimate for BAC’s FY08 earnings has since dropped to $2.40.

Press Release

See Also: Bank Of America Has Strong Q2, Says Will Maintain Dividend
BofA Cut to Sell On Idiotic Countrywide Deal
Illinois AIG Blasts Countrywide For Sketchy Mortgage Practices
Whitney Is Wrong: BAC Dividend Is Not Safe

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at