Bank of America (NYSE:BAC) joins the list of banks that have announced plans to increase dividend payouts following the successful completion of the Federal Reserve’s annual stress test. BofA intends to raise its quarterly dividend to 24 cents per share from 22 cents, effective in the third quarter of 2023.
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Based on the stock’s closing price of $29.08 yesterday, the current dividend yield stands at 3.3%.
The Fed’s stress test assesses the financial resilience of major banks, ensuring their ability to withstand economic downturns and safeguard the overall banking system. Banks that pass the stress test demonstrate adequate capital levels, enabling them to potentially enhance their plans for buybacks and dividends.
It is worth mentioning that BAC is rather late in disclosing its dividend hike. Following the stress test results released last week, JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS), and Morgan Stanley (MS) raised their Q3 dividends.
Meanwhile, BofA stated that it started discussions with the Federal Reserve on July 3 to gain a clearer understanding of the disparities between the results of the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) and BofA’s own Dodd-Frank Act stress test results. The bank said that these discussions are still ongoing.
Q2 Earnings Results
Bank of America is scheduled to release its Q2 earnings on July 18, before the market opens. The Street expects BAC to report earnings per share of $0.85, compared with $0.73 reported in the same period last year.
Is BAC a Buy or Hold?
According to the most recent reading, Bank of America has a strong balance sheet with $3.19 trillion worth of assets. Furthermore, the company ended last quarter with $1.9 trillion in deposits. These strong metrics indicate that the bank is well poised to weather any financial storm, which helps instill confidence in the stock.
According to the analyst consensus, BAC is a Moderate Buy based on seven Buy, six Hold, and two Sell ratings. The average Bank of America stock price target is $33.95, implying 16.75% upside potential.
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