Merrill Lynch (MER) CEO John Thain has continually denied that he will cut Merrill’s 35 cent dividend, instead insisting that Merrill’s capital levels remain adequate. Options traders, however, aren’t buying it and are pricing in a cut of 50% or more.
If Merrill went through with a cut, it would be the first time the company reduced its dividend since it went public in 1971. Bloomberg:
The company has paid 35 cents a share since the first quarter of 2007, when Merrill’s board raised it from 25 cents. The board reaffirmed the payment on July 30. Yet a reduction to 18 cents for the fourth quarter is reflected in the market, Bloomberg data show. The data compare prices for different Merrill options and apply formulas commonly used by traders to reflect the probability and timing of dividend payments.
Merrill, the third-biggest U.S. securities firm by market value, has the highest dividend yield among peers, at 5.5 per cent. The yield moves inversely to the stock price, which has tumbled 52 per cent this year to $25.60. Jessica Oppenheim, a Merrill spokeswoman, declined to comment.
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